UK recognises India’s Carbon Credit Trading Scheme

• The United Kingdom has recognised India’s Carbon Credit Trading Scheme (CCTS) as a qualifying criterion for pricing relief under its Carbon Border Adjustment Mechanism (CBAM).

• The move would reduce the tax burden on domestic exporters.

• The UK’s HM Treasury confirmed that the CCTS has been included in the UK’s published indicative list of overseas carbon pricing schemes assessed as qualifying criteria under a provision of the CBAM regulations.

• With this recognition, UK importers of eligible Indian goods covered under CBAM will be able to seek carbon price relief corresponding to the effective carbon price borne by those goods under the CCTS, subject to satisfying the evidence and verification requirements prescribed under UK law.

Carbon Credit Trading Scheme (CCTS)

• CCTS in India is a mechanism designed to reduce greenhouse gas (GHG) emissions through carbon pricing. 

• The CCTS, notified by the government in 2023, provides an overall framework for the functioning of the Indian Carbon Market. 

• The objective of CCTS is to reduce or avoid greenhouse gas emissions from various sectors of the Indian economy by pricing the emissions through a carbon credit certificate trading mechanism.

• CCTS defines the two mechanisms namely, compliance mechanism and offset mechanism. 

i) In the compliance mechanism, the obligated entities shall comply with the prescribed GHG emission intensity reduction norms in each compliance cycle of CCTS. 

ii) In offset mechanism, the non-obligated entities can register their projects for GHG emission reduction or removal or avoidance for issuance of Carbon Credit Certificates. 

• The CCTS is expected to contribute to achieving India’s climate goals in line with the commitments under UNFCCC and its Paris Agreement.

• As sectoral coverage deepens and the compliance mechanism matures, the Indian Carbon Market  is poised to play a central role in aligning industrial growth with India's long-term climate objectives and net-zero pathway.

• The government does not allocate any funds for the administration of CCTS. The scheme expenses would be covered by the fee and charges collected from entities under CCTS and Bureau of Energy Efficiency’s own resources.