Context:

• The Indian government has set greenhouse gas emissions intensity targets for nine heavy industrial sectors under the Carbon Credit Trading Scheme (CCTS).
  • The eight sectors are aluminium, cement, paper and pulp, chlor-alkali, iron and steel, textile, Fertiliser, petrochemicals and petro refineries.
• To assess how ambitious these targets are, the analysis suggests that they should not be evaluated at the level of individual entities or sectors.
• Instead, ambition should be measured at the aggregate, economy-wide level.

Background: India’s Emerging Role in Global Carbon Pricing

• India is positioning itself as a key player in global carbon pricing alongside Brazil and Türkiye.
• With the launch of the Carbon Credit Trading Scheme (CCTS) in July 2024, India is moving towards a rate-based Emissions Trading System (ETS) covering nine energy-intensive industrial sectors.
• The scheme targets emissions intensity reduction rather than absolute emissions caps.
• Facilities that perform better than benchmark emissions intensity levels earn Credit Certificates.
• CCTS has two components:
  • A compliance mechanism for obligated industrial entities.
  • An offset mechanism for voluntary participants.
• This initiative lays the groundwork for India’s national carbon market by providing an institutional framework aimed at decarbonizing the economy through market-based incentives.

Aggregate Economy-Level Assessment Matters for Evaluating Emission Targets

• India’s experience with the Perform, Achieve and Trade (PAT) scheme shows that while energy intensity may vary across individual entities or sectors, overall economy-wide energy efficiency can still improve.
• This highlights that the true measure of ambition in schemes like the Carbon Credit Trading Scheme (CCTS) lies at the aggregate, economy-wide level—not at the entity or sector level.
• Entity- or sector-level targets mainly determine financial transfers through market mechanisms but do not reflect overall emission intensity reduction.
• Historical sector-level performance under PAT is not a reliable benchmark for future ambition, as climate action needs to progressively align with India’s Nationally Determined Contributions (NDCs) and its 2070 net-zero goal.
• Therefore, assessing CCTS targets requires comparing them against future economy-wide pathways rather than past industry-level outcomes.

Assessing the Ambition of India’s Industrial Emissions Targets

• Result of a recent modelling
  • Recent modelling shows that for India to meet its 2030 NDC, the carbon dioxide emissions intensity of the energy sector (emissions per unit of GDP) needs to decline at an average rate of 3.44% per year between 2025 and 2030.
  • For the manufacturing sector, emissions intensity of value added (EIVA) is projected to decline by at least 2.53% annually over the same period.
• Analysing India’s new Carbon Credit Trading Scheme (CCTS) targets
  • When analysing India’s new Carbon Credit Trading Scheme (CCTS) targets, the average annual EIVA reduction across the eight covered industrial sectors is estimated at only 1.68% per year between 2023–24 and 2026–27.
  • This is notably slower than both the economy-wide target and the manufacturing sector projection, suggesting that industrial targets under CCTS may not be ambitious enough.
  • Although the CCTS covers only a subset of India’s manufacturing base, this estimate offers the closest available benchmark until more comprehensive sectoral modelling is done.

Conclusion

• Ultimately, the key measure of ambition lies in the overall aggregate emissions intensity decline, not just in isolated sectoral or entity-level targets.
• This aggregate perspective is critical to judging whether India’s industrial decarbonisation is keeping pace with its broader climate commitments.