India’s carbon credits banking limit to be announced soon, 2027 emission targets by end of FY2025: BEE

The announcement on how long compliance entities can bank their carbon credit certificates in the upcoming Carbon Credit Trading Scheme, or CCTS, in India is likely to be made over the next few weeks, the Director of Bureau of Energy Efficiency Saurabh Diddi told S&P Global Commodity Insights exclusively on the sidelines of India Climate Week in New Delhi Feb. 5.

Carbon Credit Certificates will be deemed as tradeable instruments once the domestic market gets operationalized, which participants can use to mitigate their emissions.

Mandated entities that restrict their emissions below their targets earn credit certificates, while facilities that fail to meet their target in a given compliance year will be required to purchase certificates and surrender them to the government.

It was previously announced that compliance entities in the scheme will be permitted to bank CCCs for future use, but the duration they can hold these credits without utilizing them against their emissions is not yet specified.

"As long as we do not announce, it can be assumed that the CCCs can be held lifelong, but an official announcement will be made over the next few weeks," Diddi told Commodity Insights without specifying the timeline of the announcement.

The CCTS is poised to be India's version of a carbon market and is being developed to facilitate the transition towards reducing greenhouse gas emissions and subsequently achieving "net zero" status.

The market comprises compliance and offset schemes, which pertain to entities mandated by the government to reduce their emissions and entities that voluntarily set up facilities that reduce or remove traces of carbon dioxide from the atmosphere.

Targets for compliance entities

While speaking at a panel discussion, Diddi further said BEE is going to notify targets for the nine sectors identified for the compliance mechanism till 2027 by the end of the current financial year.

"We have already calculated what will be the marginal cost for improving or say reduction of 1 mt of CO2 [mtCO2e] in each sector, and accordingly we calculated targets till 2030," Diddi said during the panel discussion.

The first target period will be for the 2025-26 financial year and before March 31, the obligated entities will have to meet their targets, Diddi said, adding compliance will subsequently begin from March through July or August in 2026. India's financial year runs from April through March.

The Indian government has identified iron and steel, pulp and paper, petrochemicals, petroleum refinery, aluminum, chlor alkali, cement, fertilizer, and textile sectors as obligated entities for the compliance mechanism.

Diddi also said the government may issue carbon credit certificates to these industries by October 2026 and expect trading of these certificates to commence from then.

Offset market

Commodity Insights reported earlier that the government released a list of 12 draft methodologies for six sectors under Phase 1 of the domestic offset mechanism, moving a step closer to creating a robust carbon market in the country.

Market sources said the announcement of the draft methodologies provides clarity to market participants, such as project developers, who are considering setting up facilities and generating carbon credit certificates that can be traded in CCTS.

India is one of the largest suppliers of credits in the existing international voluntary carbon markets, with several project developers in the renewable energy and cookstove segments.

A few project developers have recently tried to venture into other segments in the market such as biochars and enhanced rock weathering.

Through 2024, Platts heard indicative values for biochar credits originating from India in the range of $110-$160/mtCO2e, Commodity Insights data showed.