Assessing India’s Carbon Credit Trading Scheme Targets

• Vaibhav Chaturvedi, Senior Fellow at the Council on Energy, Environment and Water (CEEW), suggests that the ambition of India’s carbon market targets should be assessed at an aggregate economy-wide level.

• The eight heavy industrial sectors covered in India’s Carbon Credit Trading Scheme (CCTS) compliance mechanism include aluminium, cement, paper and pulp, chlor-alkali, iron and steel, textile, petrochemicals and petro refineries.

• The Perform, Achieve and Trade (PAT) scheme, India’s flagship energy efficiency programme, shows that achieving energy intensity reduction at an aggregate level is more important than achieving the same at the entity level for all entities.

• Entity or sector-level targets are not important to reduce emissions as they only determine financial transfers across entities and sectors, not the overall emission intensity decline.

• Comparing the new CCTS targets with historical sector-level performance under the PAT scheme is not the most meaningful approach to assess ambition.

• The carbon dioxide emissions intensity of India’s energy sector (per unit of GDP) is expected to decline at an average annual rate of 3.44% between 2025 and 2030.

• The combined average annual EIVA reduction for the eight sectors based on current CCTS targets is estimated at 1.68% between 2023-24 and 2026-27.

• Early signs suggest that the industrial targets under CCTS may not be ambitious enough.