India’s carbon market targets fall short of driving meaningful industrial decarbonisation, according to a new report by Bengaluru-based think tank Climate Risk Horizons. The analysis finds that the country’s proposed Carbon Credit Trading Scheme (CCTS) sets emissions intensity reduction targets that are too modest to encourage industries to invest in breakthrough low-carbon technologies. Instead, companies in sectors such as steel, cement and aluminium are expected to meet compliance through incremental operational improvements. The report also estimates that India’s initial carbon credit price could be around $10 (approximately ₹955) per tonne of CO₂ equivalent, making non-compliance relatively inexpensive for many large emitters.

Adding to the concern, the power sector, responsible for nearly 55% of India’s greenhouse gas emissions, has been excluded from mandatory compliance, limiting the scheme’s overall effectiveness in accelerating industrial transformation.

Low Targets May Limit Industrial Decarbonisation

The report, Unlocking Ambition for India’s Carbon Credit Trading Scheme, reviewed the draft Greenhouse Gas Emission Intensity Target Rules issued on 26 June 2026 for the iron and steel, cement and aluminium industries.

Researchers concluded that most major companies in the steel and cement sectors are required to reduce emissions intensity by only 2% to 5% by 2026-27, a level that can be achieved through routine efficiency improvements rather than large-scale investments in cleaner production technologies.

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Why the Report Raises Concerns

India’s carbon market targets fall short, highlighting that the proposed intensity-based trading system differs from cap-and-trade models used in several international markets.

• Instead of limiting total emissions, the CCTS measures emissions per unit of production, allowing overall emissions to increase if industrial output continues to grow.

Another major issue is the expected low price of carbon credits.

• According to the report, purchasing credits to offset excess emissions would cost many companies only 0.6% to 7% of their annual profits, making it financially easier for high-emitting industries to buy credits instead of investing in decarbonisation technologies.

Anirudh TR, author of the report, warned that this could encourage a “paying to pollute” approach during the scheme’s early years.

Key Findings From the Report

Power Sector Exclusion Weakens the Scheme

• The report argues that excluding the power sector significantly reduces the impact of India’s upcoming carbon market.
• Since electricity generation remains the country’s largest source of greenhouse gas emissions, the researchers recommend bringing the sector under mandatory compliance in future phases of the CCTS.
• They also recommend strengthening governance by creating an independent regulator, introducing reserve price floors and market stability reserves, and aligning the CCTS with existing climate initiatives such as the Renewable Consumption Obligation.

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Stronger Targets Needed for Long-Term Climate Goals

While the report acknowledges that an intensity-based carbon market is appropriate for a rapidly growing economy like India, it stresses that significantly more ambitious emissions targets will be necessary to unlock industrial transformation. Without stronger compliance requirements and higher carbon prices, businesses may continue relying on incremental efficiency improvements rather than adopting technologies capable of delivering deep decarbonisation.

As India prepares to operationalise its carbon market, the report suggests that raising ambition now will be essential if the CCTS is to become a meaningful driver of industrial competitiveness and long-term climate action.

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