India carbon rules expose industrial transition gaps
Steel, cement, and aluminium plants may face higher compliance pressure due to limited near term abatement options.
India's Carbon Credit Trading Scheme (CCTS) is set to make carbon performance a more significant compliance and investment consideration for 490 regulated entities, with heavy industries facing closer scrutiny over emissions intensity and transition plans.
The scheme introduces facility-level performance assessments against government-set emissions-intensity targets. Saurabh Trivedi, Lead Specialist for Sustainable Finance & Carbon Markets, South Asia at the Institute for Energy Economics and Financial Analysis (IEEFA), said the scheme would strengthen existing environmental, social and governance (ESG) assessments rather than create a new source of emissions data.
“The CCTS is likely to sharpen the ESG assessments rather than creating an entirely new source of emissions information,” he said.
India's listed companies already disclose emissions through mandatory business responsibility and sustainability reporting requirements. Trivedi said the new system gives ESG analysts an objective measure of how individual facilities perform against regulated emissions targets.
However, he cautioned that regulatory compliance should not be equated with climate leadership. Companies could meet their CCTS targets or earn compliance credits whilst still falling behind their own decarbonisation commitments. He said ESG assessments should also consider long-term targets, capital expenditure and transition plans.
India has adopted an emissions-intensity trading system that measures emissions per unit of production rather than imposing a fixed cap on total emissions. Facilities that outperform their targets can generate larger credit surpluses as output grows, whilst those that underperform face larger compliance obligations.
Trivedi said compliance risks are likely to be higher for coal-based iron and steel, integrated cement, primary aluminium, refineries and petrochemicals because commercially viable emissions-reduction options remain limited. However, efficient facilities within those sectors may still outperform their targets.
He added that aluminium could become one of the easier sectors to decarbonise if producers secure reliable round-the-clock low-carbon electricity, as it faces fewer process-related emissions challenges than steel or cement.
