In a move to combat industrial pollution and accelerate the shift toward cleaner production, the Ministry of Environment, Forest and Climate Change has unveiled a draft notification establishing India’s first legally binding carbon market.
Under the proposed Greenhouse Gas Emission Intensity Target Rules, 2025, over 460 industrial facilities—designated as “obligated entities”—will be required to cut their greenhouse gas (GHG) emissions per unit of output or offset the excess through carbon credit purchases.
The draft rules, issued on June 23, are part of the Carbon Credit Trading Scheme (CCTS), 2023. They mandate emission reductions across major polluting sectors such as aluminium, steel, petrochemicals, oil refining, and textiles. Once finalised, the targets will be legally binding under the Environment (Protection) Act, 1986. Non-compliance will attract financial penalties and legal consequences.
The initial targets will apply over two years ( 2025–26 and 2026–27) and are based on emissions data collected in 2023–24. The Bureau of Energy Efficiency (BEE) will set the targets using industry benchmarks and historical performance.
Emission intensity is measured as the amount of carbon dioxide (or its equivalent) released for every unit of product. For instance, Hindalco’s aluminium plant in Taloja, Maharashtra, had a baseline of 1.3386 tonnes of CO2 per tonne of aluminium in 2023–24, and it must reduce this to 1.2563 by 2026–27.
In the steel sector, ArcelorMittal Nippon Steel’s Hazira plant, the largest of its kind in India, has been told to reduce its emissions from 2.2701 to 2.1696 tonnes of CO2 per tonne of steel produced.
Oil refineries are also covered. BPCL’s Bina Refinery in Madhya Pradesh must lower its GHG emissions from 5.2312 to 4.8553 tonnes per million barrels processed. Kochi Refinery, one of the largest in the country, faces a similar target.
Companies that emit less than their assigned limit will earn carbon credits based on the difference and their production volume. These can be saved and used in future years. But if a company overshoots its target and fails to buy enough credits, it will face a financial penalty.
The Central Pollution Control Board will impose an Environmental Compensation set at twice the average market price of the carbon credits during that trading period. This must be paid within 90 days.
Any money collected through penalties will be used to support the running of the carbon market, based on recommendations from a national committee and approval by the central government. The ministry has invited industry and public feedback on the proposal. Comments and suggestions can be sent via email within 60 days of the draft’s release to ccts.hsm-moefcc@gov.in.
