India to get its first carbon market by mid-2026

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The government will launch the much-awaited Indian Carbon Market in 2026, while the emission intensity targets to get the system going will be rolled out in a month or two, power minister Manohar Lal Khattar has said.

The carbon market will be a vital step towards reducing emissions, a cleaner industry and meeting India's net zero goal by 2070.

Khattar said groundwork was being laid and the ministry was aiming for a soft launch at the earliest to test the market and plug issues, if any.

“I am certain that the power ministry will be in a position to launch the Indian Carbon Market by mid-2026,” Khattar said at the International Conference on Carbon Markets, Prakriti 2025, which concluded on February 25.

Carbon markets provide a market-based mechanism to incentivise businesses and governments to reduce greenhouse gas emissions by creating a financial value for carbon reduction through buying and selling the so-called carbon credits.

In the run-up to the launch of the carbon market, the Bureau of Energy Efficiencies (BEE), under the power ministry, will also roll out emissions intensity targets for nine “hard-to-abate” sectors: iron and steel, aluminium, chlor-alkali, cement, fertilisers, pulp and paper, petrochemicals, petroleum refineries, and textiles.

More sectors will be added at a later stage, officials said.

Also Read: India's peak power demand may hit 270 GW this summer: Minister for Power ML Khattar.

The nine sectors that will have to meet the emission-intensity reduction targets are covered by BEE’s Perform, Achieve and Trade (PAT) scheme.

PAT is a mandatory energy-efficiency programme covering more than 1,000 entities from 13 energy-intensive sectors.

While it focuses on decreasing energy consumption per unit of production, the emission intensity reduction framework will directly measure and target greenhouse gas emissions.

The BEE is drawing a sectoral green-house gas (GHG) emissions intensity trajectory up to 2030 for each sector. This trajectory will be based on India’s Nationally Determined Contribution (NDC) commitments, available technology, and expected marginal abatement costs in the respective sectors.

India, under the Paris Agreement, aims to reduce GDP emissions intensity by 45 percent from 2005 levels and increase non-fossil fuel energy capacity to 50 percent by 2030, with a long-term goal of achieving net-zero emissions by 2070.

“The trajectory will be imposed in a staggered manner because some of these sectors are yet to transition to better technology for emission reduction, and doing so is expensive,” Akash Tripathi, additional secretary in the power ministry said.

They may, for instance, be asked to achieve 40 percent of their target by 2027 and the remaining will have to be covered by 2030, he said.

Also Read: NHPC to add 2,170 MW, commission India's largest hydro project in FY26: CMD Raj Kumar Chaudhary.

The Indian Carbon Market (ICM) is a framework set up by the government to regulate, trade, and incentivise carbon emissions reductions.

In July 2024, the government adopted detailed regulations under the Carbon Credit Trading Scheme (CCTS). The CCTS defines two mechanisms namely, compliance mechanism and offset mechanism.

In the compliance mechanism, the entities shall comply with the emission norms in each compliance cycle of CCTS. The entities that bring their emissions below the prescribed intensity shall be eligible for carbon credit certificates.

In the offset mechanism, the non-obligated entities can register their projects for GHG emission reduction or removal or avoidance for issuance of carbon credit certificates.