Carbon Credits for Petroleum Refineries in India: CCTS Targets, NRGF and What a Shortfall Costs
On 13 January 2026 the Ministry of Environment, Forest and Climate Change notified greenhouse gas emission intensity (GEI) targets for petroleum refineries, petrochemicals, textiles and secondary aluminium under the Carbon Credit Trading Scheme (CCTS). The notification added 208 obligated entities and took the compliance mechanism of the Indian Carbon Market to 490 units.
Which refineries are obligated entities under CCTS
The amendment covers 21 petroleum refineries. Reporting on the notification names units run by Indian Oil, Bharat Petroleum, Hindustan Petroleum, Numaligarh Refinery and Reliance Industries, alongside 11 petrochemical units, 173 textile units and 3 secondary aluminium plants.
Three design features matter for a refinery sustainability lead:
Baseline and compliance years. FY2023-24 is the baseline. Targets apply to FY2025-26 and FY2026-27, with the first year's obligation running retroactively from 1 April 2025.
Gate-to-gate boundary. CCTS counts fuel combustion, process units and flaring (Scope 1) plus imported electricity and heat (Scope 2). Product-use emissions are outside the boundary.
Normalised Refinery Generation Factor (NRGF). The rules adjust each refinery's target for its complexity and configuration. Every refinery's number is unique and must be modelled site by site.
Targets are expressed as tonnes of CO2e per unit of output and cover all greenhouse gases on a global warming potential basis. Across the sectors notified so far, required cuts by FY2026-27 fall roughly in the 3 to 7 percent range against the baseline, back-loaded into the second year.
What a shortfall actually costs a refinery
CCTS is an intensity-based baseline-and-credit system. Beat the GEI target and the Bureau of Energy Efficiency (BEE) issues Carbon Credit Certificates (CCCs) equal to the intensity gap multiplied by production. Miss it and the refinery must buy and surrender CCCs covering the same gap. Surrender too few and it pays environmental compensation set at twice the average CCC trading price for that compliance year.
Because throughput is large, a 1 percent miss can mean tens of thousands of tonnes of CO2e to cover. Two trading rules shape that exposure:
Exchange-only trading. The CERC regulations notified on 27 February 2026 route all CCC transactions through the approved power exchanges (IEX, PXIL and HPX) in scheduled sessions, within a floor and forbearance price band approved by CERC. Over-the-counter deals are not permitted. Our guide on how to trade Carbon Credit Certificates covers registration and settlement.
Banking without borrowing. Surplus CCCs can be held indefinitely, but next year's expected performance cannot be borrowed against. A multi-refinery group can bank a surplus at one site against a shortfall at another.
The first compliance date for FY2025-26 has passed; we covered it in India's first CCTS compliance deadline. FY2026-27 now decides whether a refinery is a net buyer or a net seller.
Where carbon credits fit, and where they do not
Compliance CCCs are the only instrument that settles a CCTS obligation. They come from over-performing obligated entities or from projects registered under the CCTS Offset Mechanism, whose approved methodologies include renewable energy, green hydrogen from electrolysis or biomass, industrial energy efficiency, compressed biogas and mangrove restoration, for projects starting on or after 1 January 2025. A refiner building captive solar or a green hydrogen unit should check early whether the asset can register, since that decides whether it earns tradeable CCCs. See how the CCTS offset mechanism issues CCCs.
Voluntary carbon credits from Verra, Gold Standard or similar registries cannot be surrendered for CCTS compliance. They still matter for retiring residual emissions outside the target gap and for product-level claims, but keep them separate from the compliance budget; a blended figure invites greenwashing questions under BRSR Core assurance.
Credits versus abatement: the refinery marginal cost question
Buy only the CCCs left over after abatement that costs less than the expected CCC price. The usual refinery levers, in rough order of cost:
Heat integration and furnace efficiency, which often pay back inside the compliance period.
Flare gas recovery and switching liquid fuel to natural gas or refinery off-gas.
Captive or contracted renewable power to lower Scope 2 intensity, remembering that the same megawatt-hour cannot earn both a REC and a CCC.
Green hydrogen for hydroprocessing: the deepest lever, still the most expensive per tonne abated.
CERC's floor and forbearance prices set the boundary for this comparison. We ran the same exercise in carbon credits versus abatement cost for steel plants, and integrated sites should read the chemicals and petrochemicals guide.
A 90-day checklist for refinery compliance teams
Confirm the notified GEI target and NRGF factor, and rebuild the FY2023-24 baseline with an accredited carbon verification agency.
Model FY2026-27 intensity under two crude slate scenarios; heavier slates raise energy use per unit of output.
Register with the ICM registry and at least one exchange before the next session.
Screen every planned renewable, hydrogen or efficiency project for offset-methodology eligibility.
Set separate budgets and retirement policies for compliance CCCs and voluntary credits.
C² supports refiners and petrochemical operators with target modelling, CCC procurement strategy and verified carbon credits for residual emissions. If your refinery is heading into FY2026-27 without a clear buy-or-build number, talk to our team.
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