What the Carbon Credit Trading Scheme is
India's Carbon Credit Trading Scheme (CCTS) is the country's first formal domestic carbon market, established under the Energy Conservation (Amendment) Act 2022. The scheme creates a legal and regulatory framework for the generation, trade, and surrender of carbon credit certificates within India. It is not a direct replica of the European Union Emissions Trading System or any other existing cap-and-trade scheme. Instead, it is a performance standard-based mechanism in which entities that outperform their assigned emission intensity or energy efficiency targets earn tradeable carbon credit certificates, and entities that underperform can purchase certificates to meet their obligations.
The scheme was formally notified by the Ministry of Power in June 2023. Its operational architecture was developed collaboratively by the Bureau of Energy Efficiency, the Ministry of Environment, Forest and Climate Change, and the Securities and Exchange Board of India. SEBI's involvement reflects the intent for CCTS carbon credit certificates to be traded on regulated exchanges, distinguishing the Indian scheme from more opaque bilateral markets that characterise some other national compliance frameworks.
The CCTS occupies a different policy space from India's earlier Perform Achieve and Trade (PAT) scheme and the Renewable Energy Certificate (REC) market. PAT was a pure energy efficiency scheme; RECs were specific to renewable energy. The CCTS is intended to be a broader carbon market instrument that can eventually cover all major emission-reduction activity types and create a unified domestic carbon price signal. That ambition is not yet fully realised in the current framework, but the architecture is designed to support it.
Understanding what the CCTS is not is as important as understanding what it is. It is not yet a cap-and-trade scheme with absolute emission limits. It is not yet an internationally linked carbon market under Article 6 of the Paris Agreement, though India's domestic framework is being designed with that eventual linkage in mind. And it is not yet fully operational in the sense that compliance obligations, offset eligibility criteria, and trading infrastructure are all still in various stages of finalisation as of early 2026.
The legal and regulatory backbone: BEE, MoEFCC, CCTS rules
The Bureau of Energy Efficiency (BEE), housed within the Ministry of Power, is the primary administrator of the CCTS. BEE was already the administrator of the PAT scheme and brings institutional knowledge of the industrial facility database, the designated consumer framework, and the third-party energy auditor ecosystem. For the CCTS, BEE is responsible for setting compliance targets, approving eligible project methodologies, accrediting verification bodies, and maintaining the carbon credit certificate registry.
The Ministry of Environment, Forest and Climate Change (MoEFCC) retains oversight of the environmental integrity dimension of the scheme. MoEFCC has jurisdiction over forestry, biodiversity, and environmental clearance processes that intersect with many of the project types expected to generate CCTS offset credits. The interaction between BEE's commercial efficiency mandate and MoEFCC's environmental mandate is one of the structural tensions the scheme must navigate.
SEBI is involved in the market infrastructure dimension. Carbon credit certificates, once issued under the CCTS framework, are intended to be traded on existing commodity exchanges such as the Indian Energy Exchange (IEX) and the Multi Commodity Exchange (MCX). SEBI's regulatory oversight of these exchanges extends to carbon credit trading. This creates a degree of market infrastructure maturity that many emerging carbon markets lack.
The CCTS Rules 2023, notified under the Energy Conservation Act, provide the legal framework for the scheme. They define compliance entities, carbon credit certificates, the role of the Grid Controller of India, and the governance structure of the national steering committee. Subordinate regulations covering eligible project categories, additionality standards, monitoring requirements, and offset track credit eligibility are being issued progressively by BEE through notifications and guidelines.
Businesses that need to track the regulatory development of the CCTS should monitor BEE's official gazette notifications, the parliamentary standing committee on energy reports, and SEBI circulars related to carbon market trading infrastructure. V4 publishes CCTS regulatory updates as part of its insights programme.
Who must comply, and on what timeline
The CCTS's compliance track is built on the foundation of India's Designated Consumers (DCs), the large industrial facilities already covered by the PAT scheme. There are approximately 1,100 designated consumers in the current PAT cycle, spanning sectors including thermal power, cement, iron and steel, aluminium, fertilisers, chlor-alkali, petroleum refineries, pulp and paper, textile, and railways.
Under PAT, designated consumers are assigned specific energy consumption targets and must either meet those targets or purchase Energy Saving Certificates (ESCerts) from over-performing peers. The CCTS is designed to transition and expand this framework, adding carbon intensity alongside energy intensity as a compliance metric, and expanding the tradeable instrument from ESCerts to carbon credit certificates with broader applicability.
The first CCTS compliance period is expected to cover FY2026-27 through FY2028-29. BEE has indicated that it will publish sector-specific baselines and compliance targets for the first period in advance, following the model of PAT cycle target notifications. The exact timeline has slipped from initial projections due to the complexity of aligning with MoEFCC's environmental standards and SEBI's market infrastructure requirements, but the political commitment to operationalise the scheme in the current government term remains strong.
Smaller entities outside the designated consumer framework are not directly subject to CCTS compliance obligations in the first period. However, supply chain pressures are creating indirect compliance demand. Large designated consumers in sectors like cement and steel are beginning to require emission reduction documentation from suppliers, extending the effective reach of the CCTS framework down the value chain.
International entities operating in India through subsidiaries or joint ventures will need to understand the CCTS obligations of their Indian incorporated entities separately from their global carbon accounting frameworks. A subsidiary that is a designated consumer may face CCTS obligations that differ from, and interact with, the parent company's voluntary SBTi or CDP commitments.
How CCTS credits are issued and traded
CCTS carbon credit certificates are issued through a process that begins with project registration and ends with registry issuance following third-party verification. The process has two tracks with distinct pathways.
Under the compliance track, designated consumers that outperform their assigned targets generate carbon credit certificates automatically through the performance assessment process. BEE calculates the excess performance, converts it to a carbon credit certificate quantity using the applicable emission factor or intensity metric, and issues certificates to the over-performing entity's registry account. These certificates can be banked, traded, or surrendered against future compliance obligations.
Under the offset track, independent project developers submit projects for registration with the CCTS offset registry. Eligible project types must use approved methodologies and must demonstrate additionality relative to a regulatory or commercial baseline. Registered projects implement their monitoring plans, have monitoring reports verified by BEE-accredited verification bodies, and submit verified monitoring reports for credit issuance. Once issued, offset track certificates can be traded on approved exchanges or bilaterally.
Trading infrastructure for CCTS certificates is being built on existing commodity exchange platforms. The Indian Energy Exchange, which already operates the REC market, is the leading candidate for CCTS certificate trading. Exchange-based trading provides price transparency, standardised settlement, and regulatory oversight that bilateral OTC markets cannot offer. Early market participants are beginning to build their exchange access infrastructure in anticipation of the first compliance period.
Banking and borrowing rules for CCTS certificates are still being finalised. The ability to bank certificates across compliance periods would allow entities to optimise their compliance strategy and reduce compliance risk. Banking provisions are standard in well-functioning cap-and-trade markets and are expected to be included in the CCTS framework, though the precise rules are not yet published.
Quality assessment under CCTS: gaps and considerations
The CCTS framework's quality requirements for offset track credits are evolving. The draft eligibility criteria published by BEE in December 2025 establish additionality, permanence, monitoring, and safeguards as the four core pillars of quality assessment, aligning with the international voluntary market's established frameworks. However, the specific standards and thresholds within each pillar have not yet been definitively specified.
Additionality is perhaps the most contested dimension. The draft criteria reference a regulatory additionality test (the project must go beyond legal requirements) and a financial additionality test (the project would not be commercially viable without carbon revenue). Both are standard in the international voluntary market. The challenge is application in the Indian context, where energy efficiency regulations, renewable purchase obligations, and other overlapping policies create complex additionality questions for many project types.
Permanence standards for forestry and land-use projects involve buffer pool requirements and risk assessment frameworks. The CCTS draft criteria reference international approaches but do not yet specify India-specific permanence risk factors such as wildfire probability, drought stress, or land tenure security in tribal forest areas. These India-specific factors are central to V4's permanence methodology.
Monitoring requirements are the area of greatest current gap. The draft criteria require third-party verification but do not specify monitoring frequency, data source requirements, or the treatment of satellite monitoring as a supplementary or primary evidence source. For project types like cookstoves and agricultural soil carbon where field measurement is expensive and proxy-based monitoring has historically generated over-crediting, the monitoring specification will be determinative of credit quality.
Social and environmental safeguards are required under the draft criteria but are specified at a high level. The requirement for community consultation and FPIC (Free, Prior and Informed Consent) for projects affecting tribal communities is referenced but not elaborated. Given that many Indian forestry and cookstove projects operate in areas with significant tribal and forest-dwelling community populations, this dimension requires more granular specification than the current draft provides.
CCTS in the context of voluntary and international markets
The CCTS does not exist in isolation. It interacts with the international voluntary carbon market, India's domestic Green Credit Certificate programme, and the emerging Article 6 framework under the Paris Agreement in ways that have significant commercial implications.
Interaction with Verra and Gold Standard is the most immediately practical question for existing project developers. A project registered with Verra's VCS and already issuing VCUs cannot simultaneously issue CCTS offset certificates for the same tonne of emission reduction - that would be double counting. The CCTS framework is expected to require exclusive registration for offset track projects, meaning developers must choose between CCTS issuance and international voluntary market issuance. For projects where CCTS certificates command a premium due to domestic compliance demand, the choice will often favour CCTS. For projects targeting international buyers willing to pay premiums for internationally recognised standards, the choice may go the other way.
The Green Credit Certificate (GCC) programme, administered under the Environment Protection Act by MoEFCC, is a separate domestic instrument covering tree planting, water conservation, and sustainable agriculture activities. The relationship between GCC and CCTS is not yet fully clarified in regulation. The risk of double-counting between GCC and CCTS instruments for forestry activities is a live regulatory question.
Article 6 linkage with international carbon markets is a medium-term ambition of the Indian government. Under the Paris Agreement's Article 6.2, countries can bilaterally transfer Internationally Transferred Mitigation Outcomes (ITMOs), which requires a corresponding adjustment to ensure no double-counting against India's NDC. The CCTS framework is being designed with Article 6 compliance architecture in mind, meaning that CCTS certificates that are exported as ITMOs will generate a corresponding adjustment against India's emission account. This has implications for the supply of CCTS certificates available for domestic compliance.
How procurement teams should prepare today
Procurement teams at compliance entities and large voluntary buyers should begin preparing for CCTS credit procurement before the first compliance period opens. The credits that will be most valuable in a competitive CCTS market will be in limited supply, and the due diligence infrastructure to identify them takes time to build.
Start with a credit quality baseline. Understand what credits are currently in your organisation's inventory or pipeline, and assess their quality against the dimensions BEE is likely to use: additionality, permanence, monitoring, and safeguards. V4 ratings for CCTS-bound procurement provide a structured assessment of these dimensions for Indian credits specifically. An inventory review that identifies quality gaps now is more valuable than a crisis response when CCTS eligibility criteria are finalised.
Build supplier relationships with high-quality project developers. The offset project developers who have invested in robust monitoring, community documentation, and independent quality assessment are the same developers whose projects are most likely to satisfy CCTS eligibility criteria. Early offtake agreements or preferred supplier relationships with these developers will secure supply ahead of competition from other compliance buyers.
Track BEE notifications actively. The CCTS regulatory framework is developing in real time. Procurement strategies that are built on assumptions about eligibility criteria need to be updated as BEE publishes new notifications, circulars, and guidelines. V4 publishes CCTS regulatory tracking updates as part of its insights programme.
Consider the interaction with your voluntary commitments. If your organisation has SBTi commitments or other voluntary climate pledges, the carbon credits you purchase for CCTS compliance purposes may or may not be usable for voluntary claim purposes depending on the applicable standards. The SBTi Corporate Net-Zero Standard's limits on credit use for near-term target claims may interact with CCTS credit procurement in ways that require careful accounting. Get clear on the boundary between your compliance and voluntary credit pools early.
Frequently asked questions
Q: When will the first CCTS compliance period begin?
BEE has indicated the first compliance period is expected to cover FY2026-27 through FY2028-29. As of early 2026, target notifications for designated consumers have not yet been published, and some slippage from initial timelines has occurred. Procurement teams should plan for an operational start in the FY2026-27 timeframe while monitoring BEE notifications for definitive confirmation.
Q: Can existing Verra or Gold Standard credits be used for CCTS compliance?
The draft CCTS eligibility criteria reference international voluntary market registries as eligible frameworks, suggesting that credits from accredited Verra and Gold Standard projects may satisfy CCTS offset track requirements. However, the exclusive registration requirement means that project developers would need to register specifically for CCTS offset issuance rather than VCS or GS issuance for the same tonne. The regulatory position on transitioning existing project registrations is not yet finalised.
Q: What is the price outlook for CCTS compliance credits?
Market analysts have estimated CCTS compliance credit prices in the range of USD 5-15 per tonne in early compliance periods, depending on demand from designated consumers and supply from offset track projects. These estimates are speculative given that the first compliance period has not yet opened. Price levels will depend critically on the stringency of compliance targets, the volume of offset track supply allowed, and the extent to which international buyers compete with domestic compliance buyers for the same credits.
Q: How does a project register for the CCTS offset track?
BEE is expected to publish detailed offset track project registration procedures before the offset track opens for registration, anticipated in mid-2026. The process is expected to require submission of a Project Design Document aligned with an approved methodology, third-party validation by a BEE-accredited validation and verification body, and registration on the national CCTS carbon credit certificate registry administered by the Grid Controller of India.
Q: What sectors are most likely to generate CCTS offset track credits?
BEE's draft eligible project categories include renewable energy, energy efficiency, sustainable agriculture, forestry, and waste management. Among these, forestry and renewable energy projects have the largest existing pipeline of Indian voluntary market credits that could potentially be redirected to CCTS issuance. Cookstove and biogas projects also represent large potential supply, subject to methodology quality requirements.