What Is India's Carbon Credit Trading Scheme (CCTS)? A Plain-Language Guide

India's Carbon Credit Trading Scheme, commonly known as CCTS, is the country's most significant step toward building a regulated carbon market. Notified by the Ministry of Power under the Energy Conservation (Amendment) Act 2022, CCTS establishes the framework for generating, registering, and trading carbon credits across Indian industries. For businesses, this is no longer a policy conversation happening in government corridors. It is a system that will directly shape compliance obligations, cost structures, and climate strategies.

This guide explains what CCTS is, how it works, which sectors it affects, and what Indian businesses should be doing now to prepare.

What Is the Carbon Credit Trading Scheme (CCTS)?

CCTS is India's national framework for carbon credit trading. It was notified in June 2023 under the Energy Conservation Act and is administered by the Bureau of Energy Efficiency (BEE). The scheme creates a dual-market structure: a compliance mechanism where designated industrial entities must meet greenhouse gas emission intensity targets, and a voluntary offset mechanism where any entity can generate or purchase carbon credits.

The Grid Controller of India (formerly POSOCO) manages the Indian Carbon Market registry, which tracks credit issuance, ownership, transfer, and retirement. Credits issued under CCTS are called Carbon Credit Certificates (CCCs), and each certificate represents one tonne of carbon dioxide equivalent reduced or removed.

How Does CCTS Work in Practice?

The Compliance Market

Under the compliance mechanism, the central government will identify obligated entities across specific industrial sectors and set greenhouse gas emission intensity targets. These entities must reduce their emissions to meet the targets. If they reduce more than required, they earn surplus Carbon Credit Certificates which can be sold. If they fall short, they must purchase CCCs from the market or face penalties. This is similar in concept to cap-and-trade systems operating in the EU, California, and China.

The Voluntary Offset Mechanism

The offset mechanism allows non-obligated entities, including companies, project developers, and other organisations, to register emission reduction or removal projects and generate carbon credits. These credits can be sold to obligated entities or to voluntary buyers who want to offset their emissions. Projects must follow approved methodologies, undergo third-party verification, and register on the national registry.

Which Sectors Will Be Affected?

The initial sectors likely to be covered under CCTS compliance obligations include thermal power, steel, cement, aluminium, petrochemicals, and other energy-intensive industries. These are sectors already covered under the existing PAT (Perform, Achieve, Trade) scheme, and the transition to CCTS represents an expansion and modernisation of India's carbon pricing approach. However, the voluntary offset mechanism is open to all sectors, meaning any business can participate as a buyer or as a project developer.

How Does CCTS Relate to the International Carbon Market?

CCTS operates as a domestic carbon market, but it has important connections to the international landscape. Indian companies that export to the European Union will face the Carbon Border Adjustment Mechanism (CBAM), which effectively puts a carbon price on imports. Having a credible domestic carbon price through CCTS strengthens India's position in international trade negotiations and helps exporters demonstrate that their products are not being subsidised by the absence of carbon costs.

Additionally, credits generated under CCTS may in the future be eligible for trading under Article 6 of the Paris Agreement, which governs international carbon market cooperation. This could open up new revenue streams for Indian project developers and make Indian credits attractive to international buyers.

What Should Indian Businesses Do Now?

Even though the compliance targets under CCTS have not yet been fully notified for all sectors, businesses should not wait. The preparatory steps are clear: measure your greenhouse gas emissions across Scope 1, 2, and relevant Scope 3 categories; understand whether your sector is likely to be designated under the compliance mechanism; evaluate opportunities to generate credits through emission reduction projects; and develop a procurement strategy for purchasing credits if needed.

Companies that act early will have better access to high-quality credits at lower prices, stronger compliance readiness, and a more credible sustainability narrative for investors and stakeholders.

Frequently Asked Questions About CCTS

Is CCTS the same as the PAT scheme?

No. CCTS is a broader carbon market framework that will eventually subsume and replace the PAT scheme. PAT focused on energy efficiency certificates, while CCTS covers greenhouse gas emission reductions more broadly.

Can any company participate in CCTS?

The compliance mechanism applies to designated sectors and entities. However, the voluntary offset mechanism is open to any organisation that wants to generate or purchase carbon credits.

When will compliance targets be notified?

The government is progressively rolling out the framework. Sector-specific emission intensity targets and timelines are expected to be notified in phases. Businesses should monitor BEE announcements for the latest updates.

How are credits verified under CCTS?

Credits must be generated from projects following approved methodologies, verified by accredited third-party agencies, and registered on the Indian Carbon Market national registry before they can be issued as Carbon Credit Certificates.

How Csquare Carbon Can Help

Csquare Carbon helps Indian businesses understand their position within the evolving CCTS framework. Whether you need to assess your compliance exposure, develop a credit procurement strategy, or evaluate project opportunities under the offset mechanism, we provide clear, expert guidance. Book a carbon market strategy call to get started.