India Expands Carbon Credit Trading Scheme with New GEI Targets for Carbon-Intensive Sectors

India Widens the Scope of Its Carbon Market

India has taken a significant step in strengthening its climate action framework by expanding the Carbon Credit Trading Scheme (CCTS) . In January 2026, the government notified Greenhouse Gas Emission Intensity (GEI) targets for additional carbon-intensive sectors, bringing 208 new entities into the compliance framework. With this move, the total number of obligated entities under the Indian Carbon Market has increased to 490 , enhancing the scheme’s scale, depth, and effectiveness.

Why This Move Matters

The expansion reflects India’s strategy of combining economic growth with climate responsibility. By widening the pool of regulated industries, the government aims to drive efficiency improvements across some of the country’s most emission-intensive sectors while deepening market-based climate mechanisms.

Understanding GEI Targets

GEI targets measure the amount of greenhouse gas emissions generated per unit of output rather than imposing absolute emission caps. This approach allows industries to continue expanding production while progressively lowering their carbon footprint. GEI-based regulation is particularly relevant for developing economies like India, where industrial growth and emissions reduction must move together.

Under the new framework, obligated entities are required to achieve prescribed reductions in emission intensity by adopting cleaner technologies, improving energy efficiency, and optimising processes.

Expansion of the Carbon Credit Trading Scheme

With the latest notification, 208 additional entities across high-emission sectors have been brought under mandatory compliance. These entities are now required to meet GEI reduction targets or participate in carbon credit trading to offset shortfalls. The expansion improves liquidity in the carbon market and enhances its credibility as a national decarbonisation tool.

Role of the Government and Regulatory Oversight

The notification has been issued by the Ministry of Environment, Forest and Climate Change, which oversees India’s climate policy architecture. Under the CCTS framework, entities that exceed their GEI targets earn tradable carbon credits, while those that fail to comply must purchase credits from the market. This incentive-based system promotes innovation and cost-effective emission reductions rather than relying solely on punitive regulation.

How the Indian Carbon Market Functions

The Indian Carbon Market is built on tradeable carbon credits, with each credit typically representing the reduction or removal of one tonne of carbon dioxide equivalent. By allowing credits to be bought and sold, the system channels private investment into low-carbon technologies, energy efficiency, and cleaner industrial practices. Expanding the number of obligated entities makes the market more robust and financially viable.

Impact on Industry and Economic Competitiveness

For industries, the notification increases compliance obligations but also creates long-term opportunities. Firms that invest early in efficiency and clean technologies can benefit from lower operating costs, additional revenue from carbon credits, and improved global competitiveness as carbon regulations tighten worldwide. The scheme is designed to balance environmental goals with industrial growth and investment stability.

Imporatnt Facts for Exams

• GEI stands for Greenhouse Gas Emission Intensity

• Carbon Credit Trading Scheme uses market-based incentives for emission reduction

• 208