Experts Convene in New Delhi to Shape India’s Carbon Market Design

Policymakers, researchers and industry representatives gathered in the Indian capital for a high-level workshop aimed at shaping the design of a credible national carbon market, as the country prepares to roll out its Carbon Credit Trading Scheme (CCTS).

The half-day event, held at Le Méridien New Delhi, was jointly organised by the Institute for Energy Economics and Financial Analysis, Indian Institute of Technology Roorkee and Environmental Defense Fund. It brought together stakeholders from government, academia and industry to explore modelling insights and policy choices critical to the scheme’s success.

Setting the stage for India’s carbon market

Opening the workshop, speakers emphasised the need for a well-designed market that balances environmental integrity with economic growth. Experts highlighted three key pillars for success: credible carbon pricing, policy coherence across existing mechanisms, and a clear international strategy.

Participants noted that India’s CCTS will adopt an intensity-based approach—linking emissions targets to output rather than imposing absolute caps—reflecting the country’s development priorities and industrial growth trajectory. Trading is expected to begin later in 2026.

Modelling insights reveal price and sectoral impacts

A central focus of the workshop was a detailed modelling framework developed by IIT Roorkee, designed to guide policy decisions. The model integrates facility-level data across sectors such as cement, aluminium and textiles, enabling scenario analysis of emissions reductions and carbon pricing.

Preliminary findings suggested a potential market-clearing carbon price of around $11.48 per credit under baseline assumptions. The analysis also indicated significant emissions reduction potential in sectors such as textiles and paper, while overall industrial output impacts were expected to remain minimal.

Experts stressed that such models should be used to understand trade-offs and directional trends rather than produce precise forecasts, particularly given current data limitations.

Debate over market design and price stability

The second session focused on market design, with participants drawing lessons from international systems such as the EU and China emissions trading schemes. A key concern was the risk of low carbon prices in early phases due to oversupply of credits—an issue that has affected several global markets.

While some participants advocated introducing price controls such as floors or stability reserves early on, others warned that excessive intervention could distort price discovery. There was broad agreement, however, that strong political commitment and sufficiently ambitious targets would be essential to ensure a meaningful carbon price signal.

Lessons from existing schemes

India’s Perform, Achieve and Trade (PAT) scheme was cited as a useful precedent, having successfully improved energy efficiency but struggled to generate robust trading activity. Experts cautioned that the new carbon market must avoid similar pitfalls, particularly the accumulation of surplus credits and weak price signals.

Participants also highlighted the importance of long-term policy clarity, noting that industries such as steel and cement require stable signals over decades to justify investment in low-carbon technologies.

Key challenges: offsets, sector coverage and global links

The workshop identified several critical design challenges for the CCTS, including:

• Offsets: Introducing carbon offsets too early could flood the market with credits and weaken incentives for real emissions reductions.
• Sector coverage: The exclusion of the power sector may limit market liquidity, though its inclusion raises concerns over electricity prices.
• Policy coherence: Aligning the CCTS with existing instruments such as renewable energy certificates is essential to avoid double-counting.
• International markets: Engagement under Article 6 of the Paris Agreement could unlock finance but requires robust accounting to maintain credibility.

Early decisions seen as critical

In closing remarks, organisers underscored that early design choices will have long-lasting impacts on market performance. Establishing credible price signals from the outset, setting ambitious targets and carefully sequencing flexibility mechanisms will be key to building trust and ensuring effectiveness.

The workshop concluded that while carbon trading can improve efficiency, its ultimate success will depend on delivering real emissions reductions rather than simply facilitating market activity.

Next steps

Participants called for further work on several fronts, including refining emissions data, developing price stability mechanisms, clarifying rules for credit banking and offsets, and strengthening institutional capacity.

As India moves closer to launching its carbon market, the discussions in New Delhi highlight both the opportunities and complexities involved in building a system capable of supporting the country’s climate ambitions while sustaining economic growth.