The Carbon Credit Trading Scheme (CCTS) is a regulatory scheme notified by the Central Government of India on June 28, 2023, vide S.O. 2825(E). Its origin lies in the Energy Conservation (Amendment) Act, 2022, which provided the legal basis by empowering the Central Government to "Specify Carbon Trading Scheme" under Clause (w) of Section 14 of the Energy Conservation Act, 2001. The scheme was created to establish a domestic carbon market to price greenhouse gas (GHG) emissions, thereby incentivizing the decarbonization of the Indian economy and helping India meet its Nationally Determined Contribution (NDC) goal of reducing emissions intensity by 45% by 2030 from 2005 levels.
The CCTS operates through a two-pronged mechanism: a mandatory Compliance Mechanism and a voluntary Offset Mechanism. Under the Compliance Mechanism, the Ministry of Environment, Forest and Climate Change (MoEFCC) notifies legally binding GHG emission intensity targets for large industrial units in energy-intensive sectors like cement, steel, and aluminium. Entities that outperform their assigned targets earn Carbon Credit Certificates (CCCs), with each certificate representing one tonne of carbon dioxide equivalent ($\text{tCO}_2\text{e}$) reduced, avoided, or removed. Entities that fail to meet their targets must purchase CCCs from the market to comply. The Offset Mechanism allows non-obligated entities, such as those in forestry or renewable energy, to register projects and generate tradable CCCs.
The scheme is overseen by the National Steering Committee for the Indian Carbon Market (NSCICM), which is chaired by the Secretary, Ministry of Power, and co-chaired by the Secretary, MoEFCC. The Bureau of Energy Efficiency (BEE) acts as the administrator, setting emission trajectories and issuing CCCs. The Grid Controller of India (GCI) functions as the registry, maintaining records of all CCCs. Trading of CCCs is regulated by the Central Electricity Regulatory Commission (CERC), which notified the CERC (Terms and Conditions for Purchase and Sale of Carbon Credit Certificates) Regulations, 2026, to govern transactions on power exchanges. The CCTS replaces and integrates the earlier energy-saving scheme, Perform, Achieve and Trade (PAT), by transitioning the focus from energy efficiency to actual GHG emission reduction. A key recent change was the addition of the Offset Mechanism to the CCTS framework in December 2023.