India is on track to initiate its first domestic carbon credit trading by October or November 2026, following a series of developments in recent months. In January, the Ministry of Environment, Forest and Climate Change announced the second tranche of greenhouse gas emission intensity targets. Together with the first tranche released in October 2025, approximately 490 obligated entities—factories across various sectors—are required to meet specific emission targets. These entities are the cornerstone of the compliance market, where those failing to meet targets must purchase credits from overachievers. More entities are anticipated to be included in the future.
In parallel, an offset market allows voluntary credit purchases aimed at achieving self-imposed sustainability objectives. The government has approved methodologies for eight activities, which include grid-connected renewable energy, green hydrogen, industrial energy efficiency, landfill methane recovery and flaring, methane recovery from livestock, and mangrove afforestation and reforestation. Since registrations opened in June 2025, around 40 projects have reportedly been registered.
In February, the Central Electricity Regulatory Commission (CERC) established the legal framework for carbon credit trading, designating power exchanges such as the Indian Energy Exchange (IEX) and Power Exchange India Limited (PXIL) as the trading platforms. The Grid Controller of India will serve as the registry, while the Bureau of Energy Efficiency (BEE) will oversee the issuance of certificates. Trading will occur within floor and ceiling prices set by CERC.
March saw the launch of the India Carbon Market portal by Power Minister Manohar Lal, which will act as the digital backbone for the Carbon Credit Trading Scheme (CCTS). The portal will facilitate the registration of obligated entities, record validated projects, upload monitoring reports, and issue carbon credit certificates, effectively laying the administrative groundwork for impending trading.
As of January 2026, the framework for carbon trading in India is significantly established. The power ministry has indicated that trading could commence within four months post-portal launch. In the interim, obligated entities are required to submit verified emission reports by July 31, leading to the BEE issuing tradable certificates. As of now, no certificates have been released, and CERC still needs to determine floor and ceiling prices, which are projected to be around $10 per credit, significantly less than Europe’s estimated $75.
Challenges remain, particularly as two important sectors—power and agriculture—are not fully integrated into the compliance market. Power, a major carbon dioxide emitter, must be included promptly to reinforce the market. Agriculture currently falls under the offset mechanism, but essential methodologies for practices such as biochar, agroforestry, and soil carbon sequestration are yet to be defined. Biochar, for example, has significant potential as it mitigates stubble burning, enhances soil health, and can produce carbon credits.
These gaps are expected to be addressed over time, given that India’s carbon market is still in its infancy. A more significant concern lies in enforcement, drawing from experiences with the older Perform, Achieve and Trade (PAT) scheme run by BEE, which focused more on energy efficiency than on emissions. Weak enforcement led to non-compliance; many designated consumers did not register, and energy saving certificates (ESCerts) remained stagnant at the floor price due to insufficient demand.
Despite these challenges, the PAT scheme was not entirely unsuccessful; it delivered tangible savings, with one cycle achieving energy savings of 1.594 million tonnes of oil equivalent, surpassing a target of 1.059 million tonnes. However, most savings derived from the thermal power sector, leaving many others underperforming, leading to unsold ESCerts.
Researcher Diya Shah has expressed concerns that CCTS may encounter analogous issues. In an article for the Observer Research Foundation, she outlined that the accreditation of carbon verification agencies responsible for emissions data validation is largely outside regulatory oversight, echoing a conflict of interest observed in global voluntary carbon markets. Additionally, while penalties for non-compliance exist, actual enforcement remains questionable, and stronger enforcement might be ineffective unless the costs of non-compliance are considerably elevated compared to compliance costs.
Manish Dabkara, Chairman and Managing Director of EKI Energy Services Ltd, a prominent carbon credit developer, emphasizes the importance of the Indian carbon portal in enhancing data visibility, streamlining processes, and enabling broader industry engagement. He underscores the need to maintain integrity and ease of participation.
India has established much of the essential infrastructure for a domestic carbon market, including rules, targets, registry, exchanges, and a trading portal. The success of this market will depend not only on the framework’s design but also on effective enforcement and the credibility of price signals.
