India’s first carbon trading programme is finally getting off the ground, a big moment for the country’s climate policy. The Bureau of Energy Efficiency (BEE) is rolling out the Carbon Credit Trading Scheme for 2025–26, and that’s straight from officials at Mumbai Climate Week. Right now, about 490 factories from seven different sectors have already gotten their emissions targets, and the government sent those out in October 2025 and January 2026, so the wheels are turning on India’s first real compliance-based carbon market.

Coverage and Key Sectors

Despite the progress being made, some of the key sectors in the industrial sector are experiencing delays in being included in the scheme, and are considered to be the most polluting, such as steel and fertilizers, have not yet been allocated any emissions targets, even though they contribute a substantial amount to the industrial emissions of India and were expected to be included in the scheme.

Without their inclusion, there are approximately 800 units that contribute to the majority of industrial emissions and are still not fully covered in the first phase of the scheme. Even more alarmingly, the power sector, which is the largest polluter in India, is not currently included in the scheme.

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Market Structure and Mechanism

The carbon trading scheme consists of two different parts: a compulsory market for CO2 emissions that will apply to large emitters in nine sectors, and a voluntary market for projects that reduce emissions beyond those of regulations. The two components will be traded separately so that companies can use credits for compliance or to make money off of excess credits.

A single registry and project management portal will be launched on March 20, 2026, to facilitate registration and provide transparency, providing a price on each ton of CO2 emitted and allowing trading of those emissions. The government hopes to decrease total costs to abate emissions and convert the decarbonisation process into a market-based opportunity for companies instead of just a regulatory requirement.

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International Context and Challenges Ahead

The recent accelerated efforts towards creating a carbon price domestically, along with India’s exporters having to be protected against CBAM (Carbon Border Adjustment Mechanism) by the EU, have made progress.

While the pricing of carbon has optimism surrounding it, it will continue to be a struggle for policymakers to balance carbon costs. They have a goal to have the marginal cost of abating carbon close to $10 per tonne of CO2, which is dramatically lower than current EU prices of over $75 per tonne of CO2, therefore preventing market distortion and loss of competitiveness. As this initiative continues to grow, obtaining major sources of pollution and stable pricing will be critical components in ensuring that India’s first carbon trading programme is successful and aligns the economy with the climate commitments made.

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