India Advances Carbon Market With Rate-based ETS and Voluntary Credit Mechanisms

The Carbon Credit Trading Scheme (CCTS) in India is a mechanism designed to reduce greenhouse gas (GHG) emissions through carbon pricing. It involves two key elements: a compliance mechanism for obligated entities (primarily industrial sectors) and an offset mechanism for voluntary participation. The CCTS aims to incentivize and support entities in their efforts to decarbonize the Indian economy. CCTS laid the foundation for the Indian Carbon Market (ICM) by establishing the institutional framework.

India is now actively developing a rate-based Emissions Trading System (ETS) and associated voluntary carbon crediting mechanisms. The World Bank’s “State and Trends of Carbon Pricing 2025” report has recognized India’s growing role among emerging economies in shaping global climate finance and carbon pricing frameworks.

Rate-based Emissions Trading System (ETS) refers to a system where total emissions are not capped, but individual entities are allocated a performance benchmark that serves as a limit on their net emissions. Rate-based ETSs offer additional flexibility in managing future growth uncertainty as well as international competitiveness concerns.

Voluntary Carbon Market and Policy Support
India is also developing a voluntary crediting mechanism for sectors outside the ETS, such as agriculture, clean cooking, and forestry. This is expected to attract private investment for climate-positive projects.

The Energy Conservation (Amendment) Act, 2022, provided the legal basis for India's carbon market and empowers the central government to issue carbon credit certificates, while the National Green Hydrogen Mission aims to produce 5 MMT of green hydrogen per annum by 2030.

Government Steps to Strengthen Carbon Market Readiness

To steer the carbon market, the government has formed the National Steering Committee for the Indian Carbon Market (NSCICM), which works alongside the Bureau of Energy Efficiency (BEE) under the Ministry of Power. The committee formulates emission benchmarks, oversees credit issuance, and ensures market transparency.

Mission LiFE and the Green Credit Program

In line with India’s global climate commitment, Mission LiFE (Lifestyle for Environment) is a global movement launched by India to promote sustainable living. Its goal is to mobilize 1 billion people globally to take individual and collective action for protecting and conserving the environment by 2028, transform 80% of Indian villages and urban bodies into green communities, and drive measurable climate impact.

Meanwhile, the Green Credit Program, launched under the Environment Protection Act in October 2023, incentivizes tree plantations on degraded lands. Participants earn “Green Credits” verified via digital tracking and third-party audits.