|
Context
The Government of India has set emissions intensity targets for nine major energy-intensive sectors under its newly introduced Carbon Credit Trading Scheme (CCTS).
The sectors include:
- Aluminium
- Cement
- Paper and Pulp
- Chlor-Alkali
- Iron and Steel
- Textile
- Fertiliser
- Petrochemicals
- Petroleum Refineries
However, assessing the ambition of these targets should not focus solely on sector-specific or entity-specific benchmarks. A meaningful evaluation requires a macro-level, economy-wide analysis.
Background: India’s Role in Global Carbon Pricing
India is emerging as a leader in global carbon market mechanisms, alongside countries like Brazil and Türkiye.
- In July 2024, India launched the CCTS, a rate-based Emissions Trading System (ETS) targeting emissions intensity reductions rather than absolute emission caps.
- The scheme applies to nine heavy industrial sectors and is structured to reward performance through Credit Certificates for entities that outperform benchmark emissions intensity levels.
Components of CCTS:
- Compliance Mechanism – For obligated industries with mandatory targets.
- Offset Mechanism – For voluntary participants seeking to reduce their carbon footprint.
This initiative represents a foundational step toward creating a national carbon market, aiming to reduce emissions through market-based incentives.
Why Aggregate Economy-Level Assessment Is Critical
India’s earlier experience with the Perform, Achieve and Trade (PAT) scheme) illustrates that:
- While energy efficiency may vary across individual sectors or companies, overall economy-wide efficiency gains are possible.
- Hence, measuring ambition must be based on aggregate national trends, rather than on individual or sectoral outcomes.
Key Considerations:
- Sector-level targets primarily drive credit allocation and financial transactions, not broader decarbonisation impact.
- Reliance on past performance under PAT is insufficient; the evaluation should align with India’s climate commitments, such as:
- 2030 Nationally Determined Contributions (NDCs)
- Net-zero emissions by 2070
Evaluating the Ambition of India’s Industrial Emissions Targets
Modelling Insights for NDC Alignment:
- To stay on track for its 2030 NDC, India must:
- Reduce CO₂ emissions intensity of the energy sector (per unit of GDP) by 3.44% annually from 2025 to 2030.
- Lower the Emissions Intensity of Value Added (EIVA) in manufacturing by at least 2.53% annually during the same period.
CCTS Performance vs. NDC Pathway:
- Under current CCTS targets, the average annual reduction in EIVA across the eight covered industrial sectors is estimated at just 1.68% between 2023–24 and 2026–27.
- This falls short of both:
- The economy-wide target (3.44%)
- The manufacturing sector benchmark (2.53%)
Although CCTS currently applies to a limited portion of the manufacturing sector, this figure provides a provisional basis for gauging progress until further comprehensive sectoral modelling becomes available.
Conclusion
The true indicator of ambition in emissions reduction should be the aggregate decline in emissions intensity across the entire economy, rather than isolated gains within specific sectors or entities.
India’s industrial decarbonisation efforts — especially through schemes like CCTS — must be evaluated in the context of:
- Long-term national climate goals
- Alignment with India’s NDCs and 2070 net-zero trajectory
- Holistic economic transformation towards low-carbon development
|
Latest News
General Studies