India Sets Emission Targets for Four More Sectors Amid Expansion of Carbon Market

The Ministry of Environment Forest and Climate Change, in its recently published official gazette, set emissions targets for four more high-emitting sectors, i.e., aluminium (second aluminium), petroleum refinery, petrochemical and textile. Secondary aluminium indicates aluminium produced from recycled scrap.   

The Greenhouse Gases Emission Intensity Target Rules were amended on January 16 and formally announced in October 2025. Three months after it first covered the aluminum, cement, chlor-alkali, and paper and pulp industries, the scheme now covers eight industries in total. The targets impose legal obligations on listed industries to lower their emissions. Industries can produce carbon credits for exchange on the compliance carbon market if they outperform their goals.

However, failing to meet the target will result in the payment of environmental compensation equal to twice the amount of the average carbon credit in the evaluation year. Industries are obligated to meet targets over two compliance years, 2025-2026 and 2026-2027.

According to a report published by the Council on Energy, Environment and Water (CEEW), delays in notifying the final targets led to less stringent targets and a missed opportunity in reducing an additional 2.8 metric tonnes of carbon dioxide or its equivalent (CO2e) by 2027. The government also planned to include the iron and fertiliser industries in the carbon market, but has failed to set targets for them so far.

“Lower stringency could reduce the overall mitigation achieved under the scheme and lead to a potential oversupply of carbon credits, especially since the targets look achievable for sectors such as aluminium, iron and steel, and cement that already represent around 70% of Carbon Credit Trading Scheme (CCTS)-covered emissions,” stated the CEEW report.

Compliance Framework Tightens

India’s carbon market has broadened its Greenhouse Gas Emission Intensity Target Rules, 2025, to include four additional high-emitting sectors—petroleum refineries, petrochemicals, textiles and secondary aluminium—bringing 208 industrial units under legally binding emissions reduction requirements for 2025-26 and 2026-27 compliance years, reported The Indian Express.

According to CEEW, the CCTS establishes an intensity-based “baseline-and-credit” system. Each covered facility has a baseline greenhouse gas (GHG) intensity (tonnes of carbon dioxide or CO2 equivalent per tonne of product/output) for 2023-24. For each compliance year, lower intensity targets are set. Entities that exceed targets can earn tradable credits, while those that fail must buy credits or face penalties equal to twice the average carbon credit price of that year.

This marks a shift from voluntary efficiency measures to a stricter compliance-linked regime aimed at cutting emissions intensity and supporting India’s climate goals.