At the current pace, India could see its first domestic carbon credit trade by October or November — the culmination of a series of steps taken in recent months.

In January, the Ministry of Environment, Forest and Climate Change released the second tranche of greenhouse gas emission intensity targets. Together with the first tranche, issued in October 2025, around 490 obligated entities — factories across several sectors — are now required to meet prescribed emission targets. These entities form the backbone of the ‘compliance market’: those that fail to meet targets will have to buy credits from those that overachieve. More entities are expected to be added over time.

Alongside this is the ‘offset market’, where the purchase of credits is voluntary, usually to meet self-imposed sustainability goals. For this, the government has already approved methodologies for eight activities, including grid-connected renewable energy, green hydrogen, industrial energy efficiency, landfill methane recovery and flaring, methane recovery from livestock and manure, and mangrove afforestation and reforestation. Open for registrations since June 2025, it is learnt that about 40 projects have been registered so far.

In February, the Central Electricity Regulatory Commission (CERC) notified the legal framework for carbon credit trading. It designated power exchanges such as IEX and PXIL as the trading platforms, the Grid Controller of India as the registry, and the Bureau of Energy Efficiency (BEE) as the administrator for issuing certificates. Trading will take place within the floor and ceiling prices fixed by CERC.

In March, Power Minister Manohar Lal launched the India Carbon Market portal, the digital backbone of the Carbon Credit Trading Scheme(CCTS). Obligated entities will register on the portal, validated projects will be recorded, monitoring reports uploaded, and carbon credit certificates issued through it. In short, the portal is the administrative layer to prepare the ground before actual trading begins.

Thus, by the first month of 2026–27, the stage has largely been set for carbon trading in India. The power ministry has indicated that trading could begin within four months of the portal’s launch.

In the meantime, obligated entities must submit their verified emission report by July 31 and the BEE will issue the tradable certificates. So far, no certificate has been issued. The CERC must also fix the floor and ceiling prices. According to some industry estimates, it may be around $10 per credit, compared with roughly $75 in Europe.

Potential bumps

Two important sectors have still not been fully brought into the compliance market — power and agriculture. Power is a major carbon dioxide emitter, so the sooner it is included the stronger will the market be. Agriculture has been listed under the offset mechanism, but the methodologies are missing for important activities such as biochar, agroforestry and soil carbon sequestration. Biochar, for instance, has strong potential because it helps avoid stubble burning, improves soil health and can generate carbon credits.

The gaps are likely to be filled over time; after all, India’s carbon market is still in the early stages.

A larger concern revolves around enforcement, owing to the experience with the older Perform, Achieve and Trade (PAT) scheme, also run by BEE, which focused on energy efficiency rather than emissions. Since enforcement was weak, many designated consumers failed to even register, and energy saving certificates (ESCerts) often remained stuck at the floor price for lack of buyers.

This, however, does not mean that the PAT scheme failed. It delivered real savings. For example, in one cycle, energy savings of 1.594 million tonnes of oil equivalent exceeded the targeted 1.059 mtoe. But much of this came from one sector — thermal power plants — while many others fell short. As a result, large volumes of ESCerts remain unsold.

Researcher Diya Shah warns that CCTS could face similar problems. In an article for the Observer Research Foundation, she points out that the assignment of obligated entities to accredited carbon verification agencies — responsible for validating emissions data — largely lies outside regulatory oversight. “This mirrors the structural conflict of interest that has undermined voluntary carbon markets globally,” she writes.

She also notes that while penalties for non-compliance exist on paper, they should not be confused with actual enforcement. And even strong enforcement may not help unless the cost of non-compliance is significantly higher than the cost of compliance.

Manish Dabkara, Chairman and MD of EKI Energy Services Ltd, a leading carbon credit developer and supplier, describes the Indian carbon portal as critical to improving data visibility, streamlining processes and enabling wider industry engagement.

He also emphasises that “the focus must remain on integrity and ease of participation”.

India has now built most of the architecture for a domestic carbon market — rules, targets, registry, exchanges and a trading portal. Whether this results in a functioning market or merely remains another compliance exercise will depend not on the elegance of the design but on the enforcement and credibility of the price signal.

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Published on April 27, 2026