UK recognises India’s carbon credit trading scheme, relief for Indian exporters
The United Kingdom included India's Carbon Credit Trading Scheme (CCTS) in its indicative list of qualifying carbon pricing mechanisms under the UK's Carbon Border Adjustment Mechanism (CBAM)
The assessment was made under Part 3, Regulation 6 of the UK's CBAM (Calculation of CBAM Rate and Determination of Carbon Price Relief) Regulations, 2026
UK importers of eligible Indian goods covered under CBAM can now seek carbon price relief corresponding to the effective carbon price already borne by those goods under the CCTS, subject to evidence and verification requirements
The recognition is expected to reduce the effective CBAM liability on Indian exports of carbon-intensive goods to the UK, and strengthens India's case for a similar carbon-price recognition arrangement with the European Union
Cooperation on carbon market design will continue through the existing UK-India Energy memorandum of understanding and the Partnership for Market Implementation
Carbon Border Adjustment Mechanism (CBAM) — Meaning and Rationale
A CBAM is a border tax/levy mechanism that prices the carbon embedded in imported goods, so that domestic producers facing a carbon price at home are not undercut by imports from countries with weaker carbon pricing. It is designed to prevent "carbon leakage" — where carbon-intensive production simply relocates to jurisdictions with lax climate regulation rather than actually cutting emissions.
By certifying that India's CCTS meets its qualifying criteria, the UK CBAM can now offset the carbon price Indian exporters have already paid domestically, lowering their net CBAM burden — a template India is using to seek equivalent treatment from the EU.
India's Carbon Credit Trading Scheme (CCTS)
The CCTS is India's flagship compliance carbon market, established to build the Indian Carbon Market (ICM) and replace the earlier Perform, Achieve and Trade (PAT) scheme, which covered only energy efficiency (not direct emissions pricing).
It is precisely because the CCTS is a government-notified, verifiable carbon-pricing mechanism (not a voluntary or unregulated scheme) that the UK could certify it as CBAM-qualifying — a distinction that matters for exam questions comparing compliance markets versus voluntary carbon markets.
Carbon Markets: Compliance vs Voluntary, and India's Paris Agreement Commitments
Carbon markets are broadly of two types — compliance markets (created and enforced by law, such as the EU ETS or India's CCTS) and voluntary carbon markets (where credits are traded outside a regulatory mandate). CBAM-style border mechanisms recognise only carbon prices from compliance-type schemes with verifiable, government-backed measurement.
The UK-India carbon price recognition is a bilateral administrative arrangement under domestic CBAM law, not an Article 6 carbon trade — a distinction relevant to differentiating types of international carbon cooperation.
- Energy Conservation (Amendment) Act, 2022 — in force from 1 January 2023
- CCTS notified: 28 June 2023; registration of obligated entities began 1 January 2025
- EU CBAM: transitional period from 1 October 2023; definitive period from 1 January 2026; CBAM certificate purchases begin 1 February 2027
- CCTS administered by the Bureau of Energy Efficiency (BEE), under the Ministry of Power
- India's NDC (2022) target: 45% cut in emissions intensity of GDP by 2030 (from 2005 levels); 50% non-fossil power capacity by 2030
- Sectors currently under CCTS: iron & steel, aluminium, cement, fertilisers, petroleum refineries, pulp & paper, textiles