Govt moots emission reduction targets for energy-guzzling companies

Proposes greenhouse gas reduction via carbon trading or sector-wise firm targets

For the first time, India is looking to introduce a compliance mechanism aimed at reducing greenhouse gas (GHG) emissions across four of the country’s most energy-intensive industrial sectors – aluminium, cement, chlor-alkali, and pulp & paper. The draft proposal seeks emission cuts through either carbon-credit trading or by setting company-specific emission reduction targets within each sector.

 

The draft outlines a schedule of emission intensity reductions for over 130 industrial entities, including major players like Vedanta, Hindalco, Nalco, UltraTech, ACC, Ambuja, Dalmia, and JSW Cement.

 

In a Gazette draft notification, the Ministry of Environment, Forest and Climate Change (MoEFCC) has proposed the Greenhouse Gas Emission Intensity (GEI) Target Rules, 2025. These rules are part of the country’s evolving Carbon Credit Trading Scheme (CCTS), 2023.

 

The primary goal of the new rules is to help India meet its Nationally Determined Contribution (NDC) commitments by lowering GEI through reduced GHG emissions and encouraging the adoption of sustainable, low-emission technologies across high-polluting industries, the MoEFCC said in its draft notification.

 

Under this framework, the Bureau of Energy Efficiency (BEE) will establish emission-intensity targets (EIT) for designated industrial sectors. 

 

These will be calculated in tonnes of carbon dioxide equivalent emissions (tCO2) per tonne of production, with the targets applying from FY26 to FY27, based on baseline data from FY24.

 

The notification states that “obligated entities” must meet the GEI targets according to the compliance schedule and in line with the provisions of the CCTS.

 

For instance, Vedanta Limited’s Smelter-II in Odisha must reduce its emission intensity from 13.4927 tCO₂ in FY24 to 13.2260 in FY26, and further to 12.8259 by FY27. Similarly, Nalco’s smelter & power complex in Angul, Odisha, would need to cut emissions from 17.3505 tCO₂ in FY24 to 16.2479 tCO2 by FY27. Other companies, including JK Cement in Karnataka, Dalmia Cement (Bharat) Ltd in Andhra Pradesh, and DCM Shriram Consolidated Ltd’s chlor-alkali unit in Kota, have also been assigned reduction targets.

 

Firms that fail to meet their EITs would be required either to buy carbon credit certificates or pay environmental compensation (EC) penalties to the Central Pollution Control Board (CPCB) for the shortfall in the relevant compliance year. The penalty amount would be set at twice the average trading price of carbon credit certificates during that compliance year, payable within 90 days.

 

Funds collected as EC will be used within the framework of the CCTS, following recommendations from the National Steering Committee for the Indian Carbon Market and with final approval from the central government.

 

The government has opened a 60-day window from the date of publication for stakeholders to submit their comments or suggestions on the draft.

 

Parth Kumar, programme manager at the industry unit of the Centre for Science and Environment, described the move as a positive step for the industrial sector. “However, the level of ambition associated with these targets will be critical, as these will determine the supply, demand, and subsequent pricing of carbon credits, which are essential for achieving the market's intended goals.”

 

He also pointed to the importance of transparency, efficiency and quality in monitoring, reporting and verification processes. Kumar further highlighted the need for robust penalty enforcement, a high floor price for credits, controls to prevent an oversupply of voluntary credits, and market stability mechanisms to ensure the scheme worked as intended.

 

India’s wider climate strategy seeks to decarbonise its industrial sectors in keeping with the country’s commitments under the United Nations Framework Convention on Climate Change (UNFCCC), particularly Article 6 of the Paris Agreement. India has pledged to cut the emission intensity of its gross domestic product by 45 per cent by 2030, compared with 2005 levels.

 

The CCTS was first announced in June 2023 as a key measure to incentivise emission reductions, allowing entities to trade carbon credits and expanding on the existing Perform, Achieve and Trade scheme. It seeks to establish a national carbon market, with a compliance mechanism for obligated industries alongside an offset mechanism for voluntary action.