Carbon Credit Trading Scheme (CCTS)

GS 3 – Environment

• Launched under the Energy Conservation (Amendment) Act, 2022 and notified in 2023.
• Aims to create a domestic carbon market to meet India’s Net Zero 2070 target and NDC commitments.
• Implemented by the Bureau of Energy Efficiency (BEE) under the Ministry of Power, with oversight from the Central Electricity Regulatory Commission (CERC).

Features

1. Market Mechanism:
   • Entities reducing GHG emissions below prescribed targets earn carbon credits.
   • Those exceeding limits must buy credits to comply.
2. Carbon Credit Certificate:
   • A tradable instrument issued by BEE for verified emission reductions.
   • Can be bought/sold on approved exchanges (e.g., IEX, PXIL).
3. Coverage:
   • Initially focuses on energy-intensive sectors (power, steel, cement, fertilizers).
   • Gradually expands to other industries and even voluntary markets.
4. Integration:
   • Aligns with existing schemes like Perform, Achieve and Trade (PAT), Renewable Energy Certificates (REC), and Energy Efficiency Financing Platform (EEFP).

Objectives

• Promote cost-effective decarbonisation.
• Incentivise industries to adopt cleaner technologies.
• Mobilise green finance through market-based mechanisms.
• Position India in the emerging global carbon market.

Benefits

• Provides flexibility for industries to meet emission targets.
• Generates additional revenue for companies investing in energy efficiency and renewables.
• Encourages innovation and private sector participation in climate action.

Challenges

• Need for robust MRV (Monitoring, Reporting, Verification) framework to prevent double counting/greenwashing.
• Risk of market volatility and speculative trading.
• Balancing domestic development priorities with global carbon pricing pressures.
• Requires capacity-building for smaller industries to participate.