• The Carbon Credit Trading Scheme (CCTS) is an important initiative launched by the Government of India in 2023 under the Energy Conservation (Amendment) Act, 2022.
• It represents India’s first step toward building a domestic carbon market, which aims to reduce greenhouse gas (GHG) emissions in a market-driven, cost-effective manner while helping the country move toward its net-zero target by 2070.
• At its core, the CCTS operates on the principle that carbon emissions carry an environmental cost, and those who can reduce emissions more efficiently should be rewarded.
• Under this system, industries or entities that emit less than their allotted carbon limit can earn carbon credits—essentially certificates representing one tonne of carbon dioxide (or its equivalent) reduced or removed from the atmosphere.
• These credits can then be sold to other entities that are unable to stay within their emission limits, creating a market for carbon.
• The Bureau of Energy Efficiency (BEE) under the Ministry of Power serves as the nodal agency for implementing the CCTS, while the Central Electricity Regulatory Commission (CERC) acts as the regulator to ensure transparency and fair trading.
• The trading itself will occur on designated power exchanges, where buyers and sellers of carbon credits can transact under clearly defined rules.
• Unlike the older Perform, Achieve and Trade (PAT) scheme—which focused only on improving energy efficiency in certain industrial sectors—the Carbon Credit Trading Scheme is broader in scope.
• It covers not only industries but also other sectors contributing to emissions, such as transport, waste management, agriculture, and forestry. This shift marks India’s transition from a narrowly focused energy efficiency mechanism to a comprehensive carbon market framework.
• To ensure integrity and reliability, emission reductions will be verified by accredited agencies following international best practices. Each verified reduction will be converted into a tradable carbon credit, ensuring the environmental credibility of the system.
• Over time, the government plans to link the domestic carbon market with international ones, allowing Indian companies to participate in global carbon trading and attract green investments.
• In essence, the Carbon Credit Trading Scheme is both an environmental and economic tool. It encourages industries to innovate and adopt cleaner technologies by providing financial incentives for emission reductions.
• Simultaneously, it helps India align its development trajectory with global climate commitments under the Paris Agreement.
• By monetizing emission reductions, the CCTS transforms climate responsibility into a tangible economic opportunity—turning carbon savings into a tradable asset that drives sustainable growth

• The Paris Climate Agreement of 2015 is a landmark international treaty adopted under the United Nations Framework Convention on Climate Change (UNFCCC), aimed at combating climate change and accelerating actions for a sustainable low-carbon future.
• It was signed during the 21st Conference of Parties (COP-21) held in Paris, France, in December 2015, and came into force on November 4, 2016.
• The agreement’s central goal is to limit the rise in global average temperature to well below 2°C above pre-industrial levels, and preferably to 1.5°C, to reduce the risks and impacts of climate change.
• Unlike the earlier Kyoto Protocol, which imposed legally binding targets only on developed countries, the Paris Agreement calls for voluntary commitments from all nations, recognizing the principle of “Common but Differentiated Responsibilities and Respective Capabilities” (CBDR-RC). This means all countries share responsibility to act, but their efforts should reflect their differing capabilities and levels of development.

4. Greenhouse gas (GHG) emissions intensity or GEI

• Greenhouse Gas (GHG) Emissions Intensity, often referred to as GHG Emission Intensity (GEI), is a key indicator used to measure how efficiently a country or an economy is producing goods and services while controlling its contribution to climate change.
• In simple terms, GHG emissions intensity represents the amount of greenhouse gases emitted per unit of economic output, usually expressed as kilograms or tonnes of COâ‚‚ equivalent (COâ‚‚e) per unit of GDP. It tells us how much carbon dioxide and other greenhouse gases are released for every unit of economic activity
• Every country produces greenhouse gases—mainly carbon dioxide (COâ‚‚), methane (CHâ‚„), nitrous oxide (Nâ‚‚O), and fluorinated gases—through activities like energy production, transport, agriculture, and industry. However, not all emissions are equal when compared to the size of their economies.
• For example, a country with a large industrial base may have high total emissions but still have low emissions intensity if it produces more output per unit of carbon released.
• On the other hand, a country with inefficient energy use or older technology may have high emissions intensity even if its total emissions are smaller.
• Thus, GHG emissions intensity reflects the efficiency and sustainability of a nation’s growth rather than just its absolute emission levels

5. Carbon Credits

• Under the Carbon Credit Trading Scheme, industries that successfully cut down their COâ‚‚ emissions will be rewarded with carbon credits.
• These credits can later be sold or exchanged in the domestic carbon trading market.
• The Bureau of Energy Efficiency (BEE) will serve as the authority responsible for issuing carbon credit certificates to eligible entities.
• Industries unable to meet their prescribed emission reduction targets will be required to purchase additional carbon credits from the market to make up for the deficit.
• In cases where industries violate or fail to adhere to the provisions of the GHG Emission Intensity (GEI) Rules, the Central Pollution Control Board (CPCB) will levy environmental compensation as a penalty.
• Similar systems of carbon credit trading have already been implemented in other regions, such as Europe (since 2005) and China (since 2021).
• In India, carbon credits are traded via the Indian Carbon Market platform, which operates under the supervision of the Bureau of Energy Efficiency within the Ministry of Power.

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6. Initiatives of the Government of India

• The National Clean Air Programme (NCAP), initiated in 2019, encompasses 130 cities across 24 States and Union Territories, aiming to bring about a notable improvement in air quality. Its target is to achieve up to a 40% reduction in particulate matter (PM) concentrations by 2025–26, using 2017–18 as the baseline year.
• To ensure real-time monitoring and transparency, the ‘PRANA’ portal has been developed to continuously update and display air quality data.
• The government has introduced Extended Producer Responsibility (EPR) regulations for plastic, tyre, battery, used oil, and e-waste, with the goal of strengthening the circular economy and ensuring environmentally responsible waste management.
• The ‘Mangrove Initiative for Shoreline Habitats & Tangible Incomes (MISHTI)’ seeks to restore and expand mangrove ecosystems, recognizing their crucial role in coastal resilience, biodiversity preservation, and livelihood generation for coastal communities.
• The Nagar Van Yojana, implemented by the National Afforestation and Eco-Development Board (NAEB), focuses on increasing tree and green cover beyond forest areas, promoting biodiversity, and enhancing urban environmental quality to improve the well-being of city residents.
• Mission LiFE (Lifestyle for Environment) is an Indian-led global campaign that advocates for sustainable living through conscious, environment-friendly choices.
• It emphasizes seven key themes — water conservation, energy saving, waste reduction, e-waste management, elimination of single-use plastics, sustainable food practices, and healthy lifestyles — to promote a culture of mindful consumption.
• The Eco-mark Rules are designed to encourage the production and use of eco-friendly goods, consistent with the ethos of LiFE.
• The initiative promotes energy efficiency, responsible resource use, and circular economy principles, while ensuring accurate labeling to prevent greenwashing or misleading environmental claims.
• The National Action Plan on Climate Change (NAPCC) serves as the umbrella framework for India’s climate strategies.
• It includes a set of national missions addressing areas such as solar energy, energy efficiency, sustainable habitats, water management, Himalayan ecosystem protection, afforestation (Green India Mission), sustainable agriculture, human health, and climate knowledge systems, all directed toward building climate resilience and sustainable growth