India kicks off carbon trading programme but key polluters left out

India readies first compliance carbon market, with 490 units notified; steel and fertiliser yet to get targets as CBAM pressure mounts

India is in the final stage of kickstarting its first ever comprehensive carbon-trading programme to report on emission generated by participating industries, according to a top official of the Bureau of Energy Efficiency (BEE).

 

This will be for April 2025-March 2026 with interviews for verifiers in progress. But steel, the most polluting industry, is yet to find a place in the first phase of operations; neither is the fertiliser sector. Their inclusion was proposed to cover 800 units, responsible for nearly all of India’s industrial emission. 

 

Denying reports that the “Carbon Credit Trading Scheme” is delayed, Saurabh Diddi, director, BEE, told Business Standard on the sidelines of “Mumbai Climate Week” that the body had issued emission targets for around 490 units, covering seven sectors, through two notifications, in October 2025 and January 2026. 

 

(The power sector, India’s biggest overall polluter, is not part of the scheme.)

 

“The first cycle of FY26 targets will end on March 31 and then we will give four months for verification and then three months for assessment and issuance. So practically we are going to issue credits in October (2026) and then we are expecting that November to January this trading will happen,” Diddi said, adding “and every year this cycle will get repeated”.

 

“These sectors and companies will cover 20 per cent of emission to begin with,” said Hisham Mundol, chief advisor, Environmental Defence Fund, India, a global organisation that works with governments and businesses on carbon markets and emission trading. As for steel and fertilisers, Mundol said they were part of the scheme but the (emission) targets had not been announced. That’s a procedural thing that will happen.”

 

The government is launching a portal on March 20 to register projects and participate in the scheme. “Whatever you are doing here as of now through emails and everything will be available on the portal, and we are trying to get the registry operational by then — so that April onwards everything will be in place,” Diddi added.

 

Navin Mathur, chief operating officer, Asvata, an RPG group carbon-credit company, said: “We expect the scheme to create a credible, transparent compliance carbon market that embeds a price on emission and turns decarbonisation into a financial opportunity rather than a cost burden.”

 

“By introducing tradable carbon-credit certificates linked to emission-intensity targets, the scheme enables efficient performers to monetise surplus reduction while allowing others to meet compliance flexibly through trading, thereby lowering overall abatement costs.”

 

The government’s October 8, 2025, final notification covered 281 units in aluminium, cement, chlor alkali, and pulp & paper; the notification of January 13, 2026, covered 208 units spanning secondary aluminium, petroleum refineries, petrochemicals, and textile, according to the Ministry of Environment and Forests.

 

Diddi declined to give a time frame to set targets for steel and fertilisers. Steel, along with fertiliser, finds a place in the European Union’s Carbon Border Adjustment Mechanism (CBAM), which came into force January and imposes a carbon tax on exporters of high-emission goods.

 

New Delhi hastened the adoption of the scheme as a counter to the CBAM, said a senior official, but there have been delays in setting targets for polluters.

 

Twin components

 

The scheme has two components: A mandatory compliance component covering 800 units in nine sectors, and a voluntary offset component. Carbon credits will be issued separately and traded separately. The targets are issued for three years under the compliance scheme.

 

The voluntary offset programme is also advancing, with the government publishing nine methodologies for validating projects and working on 15 more -- from carbon capture to nature-based solutions.

 

Diddi said two companies had submitted project-design documents (PDD) for evaluation, which, after a month of public consultation, will be evaluated for carbon-credit eligibility.

 

Under the compliance scheme, obligated entities will be given credits on a pro rata basis based on when the notification has been issued — some industries will show compliance for around seven months and the rest for three months, Diddi said.

 

Diddi said at “Mumbai Climate Week” that marginal abatement costs were taken into account while setting targets, designed for keeping carbon costs at around $10 per tonne of carbon dioxide emitted. By comparison, the carbon price under the European Trading Scheme is over $75, a benchmark for charging import taxes under the CBAM, while credits trading in neighbouring China cost around $10.

 

Deeksha Vats, group chief sustainability officer of the Aditya Birla group, said corporate-investment committees were reluctant to approve projects when the price of carbon crosses $20 a tonne of carbon dioxide.

 

Mundol said: “A lot of it depends on where the market settles. And quite frankly, in its ideal form, you don’t want a credit price which is so low that a company says, instead of producing emission, ‘I might as well just buy the credit’. Nor do you want it so high to make that company or industry or the country uncompetitive. So you need to find the right balance.’’