India carbon market launch: Credits to complement net-zero push

India Inc. is preparing for a fundamental shift in how it cuts emissions. As the country's compliance carbon market moves toward launch later this year, companies that have largely relied on reducing emissions within their own operations are expected to increasingly use carbon credits to tackle residual emissions on the path to India's 2070 net-zero target.

Active trading under the Carbon Credit Trading Scheme (CCTS) is scheduled to begin in the fourth quarter of 2026. Industry experts and ratings officials at Mint's Sustainability Impact Summit 2026 said the regulatory architecture is falling into place. They cautioned that the market's success will hinge on credible price discovery, verification systems and regulatory certainty.

For Indian corporations, decarbonization strategies have so far prioritized direct operational abatement over market offsets. Nikunj Dube, chief ratings officer for ESG Ratings at CareEdge, said company disclosures under the Business Responsibility and Sustainability Reporting framework show firms have overwhelmingly focused on internal process changes rather than buying credits.

"Ideally what we have seen from the good level of disclosures around the companies, what they have till now relied on is abatement instead of offset till now," Dube said.

He said the upcoming CCTS would give companies a structured way to manage residual emissions while they continue reducing emissions through operational changes. The transition would be gradual, as coal dependence will continue in several industrial sectors because viable alternative fuels remain limited, Dube added.

Corporate reluctance to buy carbon credits has also reflected concerns that offsets could invite accusations of greenwashing, he explained. International science-based standards are increasingly defining how companies can use credits alongside direct emissions reductions rather than in place of them.

Shuchi Malhotra, lead advisor for carbon markets at the Environmental Defense Fund, said global standards recognize that companies must continue managing emissions even as they work toward long-term decarbonization. "While you obviously do everything in your power as you decarbonise and reach your net zero goals, you also have a responsibility towards your ongoing emissions."

Malhotra said governance bodies such as the Integrity Council for Voluntary Carbon Markets have established core principles covering additionality, permanence, accurate measurement and the avoidance of double-counting. She reiterated that credits should complement, not replace, direct emissions reductions. "Carbon credits are a complement to your overall decarbonization journey. They are not a substitute."

India laid the foundation for its compliance carbon market through amendments to the Energy Conservation Act in 2023. The framework includes both a mandatory compliance market and voluntary mechanisms.

Under the compliance market, administered by the Bureau of Energy Efficiency, companies are assigned emissions-intensity baselines under a baseline-and-credit mechanism. Targets initially cover eight sectors such as cement, aluminium, chlor-alkali, pulp and paper, petrochemicals, petroleum refineries, fertilizers, and steel. Those sectors together account for more than 700 entities and roughly 20% of India's greenhouse gas emissions, Malhotra said.

Companies that outperform their emissions targets receive carbon credit certificates. Those that fall short must purchase credits to make up the difference.

The Central Electricity Regulatory Commission has issued regulations governing carbon credit transactions, with active trading expected to begin in the fourth quarter of 2026 after monitoring reports are submitted.

Agriculture could also become a major source of carbon credits, speakers said, given both the sector's emissions footprint and its potential to generate verified emissions reductions. Suhas Joshi, director and carbon initiative lead at Bayer South Asia for the Good Rice Alliance, said agriculture contributes roughly a quarter of global greenhouse gas emissions but also offers significant mitigation opportunities. "And therefore, it is important that we focus on agriculture not just as a problem, but also as a solution," he said.

Joshi said verifying emissions reductions across millions of fragmented smallholder farms requires technology-driven monitoring. Remote sensing, artificial intelligence and blockchain, he said, are becoming critical tools for measuring and validating field-level emissions reductions.

Panellists said several building blocks remain unfinished before India's carbon market can scale. Joshi said predictable regulation and rigorous monitoring, reporting and verification systems will be essential to ensure credit quality and attract investment. "Regulatory framework has to be more predictable, less ambiguous."

Dube said developing a transparent pricing mechanism remains one of the market's biggest challenges. "The issue that we currently face is the price discovery." He added that domestic ESG ratings frameworks could help build buyer confidence and channel capital into India's emerging carbon market. The first compliance cycle reports are due before trading begins in Q4 2026.

Agnidev is a business journalist with over two years of reporting experience tracking the intersection of capital, policy, and corporate strategy in India. He joined Mint in December 2025, after a stint at NDTV Profit (erstwhile BQ Prime). At Mint, Agnidev focuses on the Indian capital market, specializing in mergers and acquisitions, IPOs, and the investment banking industry.

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