Carbon Credits for Engineering & Capital Goods Companies in India: Where Offsets Fit in a Scope 3-Heavy Footprint
India's engineering exports reached a record USD 122.43 billion in FY2025-26, about 28% of all merchandise exports, and the EU bought roughly 18% of that (EEPC India). For an engineering or capital goods company, the carbon question looks nothing like a cement plant's. Your own stacks are small. The tonnes that matter sit upstream in the steel, copper and aluminium you buy, and downstream in the decades your products run at a customer's site. Here is where credits fit, where they do not, and what the proposed CBAM extension changes.
Not a CCTS obligated entity, but surrounded by them
India's Carbon Credit Trading Scheme (CCTS) assigns emission-intensity targets to nine sectors: aluminium, cement, chlor-alkali, pulp and paper, iron and steel, fertiliser, petroleum refining, petrochemicals and textiles, around 740 plants in all, with compliance years 2025-26 and 2026-27. Machinery, electrical equipment and fabricated metal products are not on the list. Unless the group runs a covered steel or aluminium facility, you have no obligation to surrender Carbon Credit Certificates (CCCs).
Your steel and aluminium suppliers do carry targets, and their compliance costs and plant-level data will flow into your input prices and product footprints. And as a non-obligated entity you can register projects under the CCTS offset mechanism (approved methodologies include industrial energy efficiency, for projects started on or after 1 January 2025) and earn CCCs rather than only buy them. Our CCTS guide covers the mechanics.
Where the emissions actually sit: Category 1 and Category 11
ABB India's Integrated Annual Report 2025 states that 97% of its Scope 3 emissions fall under Category 11, use of sold products, and that purchased goods and services, chiefly steel, copper, aluminium and plastics, are the largest upstream source. Siemens Limited reported Scope 1 and 2 emissions of just 9.8 ktCO2e in FY24 after moving to 90% renewable energy. Across the sector, operations are a rounding error and the value chain is the footprint. Each layer responds to a different tool:
Scope 1 and 2 (foundries, heat treatment, paint shops, purchased electricity): renewable power and electrification first, credits only for the residual.
Category 1 (purchased steel, copper, aluminium, castings and forgings): supplier engagement and low-carbon steel procurement. Credits do not change the embedded-emissions figure a European customer asks for.
Category 11 (the energy your motors, drives and boilers consume in service): product efficiency and grid decarbonisation. No purchasable volume of credits is realistic here. ABB's SBTi-validated target, which ABB India follows, is a 25% Scope 3 cut from 2022 levels by 2030, not neutralisation.
The CBAM downstream extension is a Category 1 problem, not a credit problem
CBAM's definitive phase began on 1 January 2026: certificates for 2026 imports are surrendered by 30 September 2027, sales open on 1 February 2027, and the price tracks EU ETS auctions. The current scope already reaches some fabricated goods such as tubes, screws and bolts, and steel structures. In December 2025 the European Commission proposed adding about 180 downstream products with high steel and aluminium content from 1 January 2028; the European Parliament's research service notes that 94% are industrial supply-chain goods such as base metal mountings, cylinders, industrial radiators and casting machines. The Council agreed its position in June 2026; Parliament was due to vote its mandate in September 2026.
Article 9 of the CBAM Regulation recognises only a carbon price paid in the country of origin: a tax, levy or fee, or allowances under a binding emissions trading system. Voluntary credits, whatever their integrity, do not reduce a CBAM bill. What does is lower embedded emissions in the steel and aluminium you buy, and actual rather than default data for your EU importer. Our CBAM guide for Indian exporters covers the data trail.
A credit strategy sized for an engineering company
Size the residual. After renewable electricity and process electrification, what is left of Scope 1 and 2 is usually measured in thousands, not millions, of tonnes a year; Siemens Limited's 9.8 kt is a useful reference point. That is a modest purchase.
Match project type to the claim. For a plant-level or corporate carbon-neutral claim, favour removals and high-integrity avoidance credits with clear vintages and retirement in your own name.
Do not offset Category 11. Report it, set an intensity target and put the budget into higher efficiency classes and grid-integration products.
Use insetting for supplier tonnes where you can. Financing a forging supplier's furnace upgrade or captive solar beats offsetting their emissions; see insetting versus offsetting.
Write the RFP around your profile: vintage, registry, project type, retirement, and no double claims with a supplier's own inventory. Our 27-question RFP template is built for this.
What to do this quarter
Commission product carbon footprints for your top 20 steel- and aluminium-intensive SKUs sold into the EU, using supplier-specific rather than default data.
Ask CCTS-covered suppliers for the plant-level intensity data they already report to BEE, and reconcile it with your Category 1 inventory.
Cost a residual-emission credit purchase for Scope 1 and 2 alongside the abatement projects that would remove the need for it; L&T's 2040 carbon-neutrality commitment shows why this sequencing matters.
C² works with Indian engineering and capital goods companies on carbon credit procurement, Scope 3 mapping and BRSR-ready reporting. Explore our carbon credit services or contact us to discuss a credit strategy sized to your actual residual.
Comments