The Indian government has introduced mandatory emissions intensity targets for high-emitting industries.
This initiative, part of the country’s broader strategy to reduce greenhouse gas emissions, aims to align with India’s commitment to the Paris Agreement and its updated Nationally Determined Contributions (NDCs). The Ministry of Environment, Forests and Climate Change (MoEFCC) has released a draft notification outlining emissions intensity targets for 282 industrial units across sectors such as aluminium, cement, chlor-alkali, and pulp and paper. These sectors have been identified based on their substantial contribution to the nation’s carbon footprint. Notably, the cement sector, responsible for 5.8% of India’s carbon emissions, has the highest number of obligated industries, with 186 units.
Under the proposed framework, industrial units are required to meet specified emissions intensity targets over two compliance periods: 2025–2026 and 2026–2027. Units that exceed these targets can generate carbon credits, which can be traded in the upcoming carbon market. Conversely, units that fail to meet their targets will be subject to fines in the form of environmental compensation, as stipulated by the Central Pollution Control Board (CPCB). The Bureau of Energy Efficiency (BEE) is tasked with administering the compliance mechanism, including setting baseline emissions, monitoring performance, and accrediting third-party verification agencies. The BEE has also been instrumental in developing methodologies for the voluntary offset mechanism, which allows entities not covered under the compliance mechanism to participate in carbon credit trading.
While the introduction of these emissions targets marks a significant step towards decarbonisation, the exclusion of the power sector—a major contributor to India’s carbon emissions—has raised concerns among environmental experts. The power sector accounts for 39.2% of the country’s carbon emissions, and its exclusion from the compliance mechanism could limit the overall effectiveness of the carbon market. Experts argue that including the power sector is crucial for the success of the carbon market. “There is a feeling that the power sector should be excluded because it’s a complex sector that is heavily regulated, and imposing targets on it could escalate costs for distributors and even consumers,” said Senior Fellow at the Council on Energy, Environment and Water (CEEW). “But this logic doesn’t hold because the power sector is already following other compliances, like obligatorily purchasing renewable energy, without such drastic impacts. Power sector inclusion should come sooner rather than later.”
The draft notification is currently open for public comments and suggestions until June 15, 2025. Stakeholders, including industry representatives, environmental organisations, and the general public, are encouraged to participate in the consultation process to ensure that the final framework is robust, equitable, and aligned with India’s climate objectives. As India moves forward with its carbon market initiatives, the success of these measures will depend on their ability to drive meaningful emissions reductions across all sectors, including the power industry. The government’s commitment to achieving net-zero emissions by 2070 underscores the urgency of comprehensive and inclusive climate policies that encompass all major sources of greenhouse gas emissions.
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