Achieving a Just Transition in India with an Effective Carbon Credit Trading Scheme

India has operationalized the Carbon Credit Trading Scheme (CCTS), notified in June 2023 under the Energy Conservation (Amendment) Act, 2022, establishing a domestic carbon market that builds on the earlier Perform, Achieve, and Trade (PAT) framework. Administered by the Bureau of Energy Efficiency (BEE) under the Ministry of Power, the scheme includes both a compliance mechanism for large “obligated entities” across key industrial sectors and a voluntary offset mechanism. In its initial phase, sectors such as aluminium, cement, chlor-alkali, iron and steel, pulp and paper, refineries, petrochemicals, and textiles are required to meet sector-specific greenhouse gas emission intensity (GEI) targets for 2025–26 and 2026–27.

India’s industrial sector plays a critical role in the country’s decarbonization journey, accounting for over 50 per cent of final energy consumption in 2023–24 while contributing significantly to economic growth. It represents around 17.45 per cent of energy sector emissions (excluding emissions from captive power plants) and about 10 per cent of overall emissions through industrial processes and product use (IPPU). However, the sector is highly diverse, with a mix of large integrated units and smaller enterprises employing varied technologies and fuels. This heterogeneity, along with workforce reskilling requirements, adds complexity to the transition toward low-carbon pathways due to which various challenges might arise affecting the extent to which implementation is possible in reality.

Against this backdrop, the study leverages TERI’s MARKAL model to develop marginal abatement cost curves (MACCs) for key energy-intensive industries, including cement, steel, aluminium, fertilizers, and refineries, in line with emission intensity reduction targets under the CCTS. The primary aim of the MAC curves being to assess the abatement costs and the associated abatement for each sectoral intervention. By assessing the cost-effectiveness of various mitigation options, such as energy efficiency improvements, fuel switching, renewable energy adoption, and carbon capture, utilization, and storage (CCUS), from 2025 to 2030 and beyond, the analysis aims to inform India’s CCTS roadmap and broader decarbonization strategy aligned with its NDCs and net-zero target for 2070.