The Abatement-to-Offsets Shift – Why Indian Companies Are Finally Buying Carbon Credits as CCTS Trading Nears

Introduction: The Tipping Point in Corporate Climate Strategy

For years, Indian corporations have approached decarbonisation through a single lens: operational abatement. Companies have focused on improving energy efficiency, switching fuels, and optimising processes to reduce emissions within their own operations.

That era is ending.

As the country's compliance carbon market moves towards launch in the fourth quarter of 2026, companies that have largely relied on reducing emissions within their own operations are expected to increasingly use carbon credits to tackle residual emissions on the path to India's 2070 net-zero target. With active trading under the Carbon Credit Trading Scheme (CCTS) scheduled to begin in the fourth quarter of 2026, industry experts and ratings officials at Mint's Sustainability Impact Summit 2026 said the regulatory architecture is falling into place. But they cautioned that the market's success will hinge on credible price discovery, robust verification systems, and regulatory certainty.

The shift is significant. It represents a fundamental change in how Indian industry thinks about carbon management — from a purely internal operational challenge to a strategic financial and market opportunity. Transition would be gradual, as coal dependence will continue in several industrial sectors because viable alternative fuels remain limited.

This guide examines the shift from abatement to offsets, what it means for Indian companies, and how businesses can prepare for the transition.

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The Abatement-First Era: What Indian Companies Have Done So Far

The BRSR Evidence

India's mandatory ESG reporting framework, the Business Responsibility and Sustainability Reporting (BRSR) guidelines, provides a clear picture of how companies have approached carbon management. Nikunj Dube, chief ratings officer for ESG Ratings at CareEdge, said company disclosures under the BRSR framework show firms have overwhelmingly focused on internal process changes rather than buying credits.

"Ideally what we have seen from the good level of disclosures around the companies, what they have till now relied on is abatement instead of offset till now," Dube said.

Why Abatement Has Been the Priority

Reason	Explanation
Cost Control	Energy efficiency measures often pay for themselves through reduced operational costs
Direct Control	Companies have direct control over their own operations
Risk Avoidance	Offsets have been viewed as risky due to greenwashing concerns
Regulatory Focus	Initial regulatory frameworks emphasised energy efficiency (PAT scheme)

The Limitations of Abatement

Limitation	Description
Hard-to-Abate Sectors	Some emissions cannot be eliminated with current technology
Cost Barriers	Deep decarbonisation can be prohibitively expensive
Time Constraints	Net-zero targets require faster action than abatement alone allows

Corporate Reluctance to Buy Credits

Corporate reluctance to buy carbon credits has also reflected concerns that offsets could invite accusations of greenwashing. These concerns have been exacerbated by media coverage of low-quality credits and projects that failed to deliver promised climate benefits.

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Why the Shift Is Happening Now

The CCTS Launch

With active trading under the Carbon Credit Trading Scheme (CCTS) scheduled to begin in the fourth quarter of 2026, the regulatory architecture is falling into place. The CCTS provides a structured, government-backed framework for carbon credit transactions.

India laid the foundation for its compliance carbon market through amendments to the Energy Conservation Act in 2023. The framework includes both a mandatory compliance market and voluntary mechanisms.

The Seven Sectors Now Covered

The Government has notified Greenhouse Gas Emission Intensity (GEI) targets for additional carbon-intensive sectors under the CCTS. A total of 208 obligated entities across these sectors will now be required to meet specified emission intensity reduction targets.

Sector	Status	Entities
Aluminium	Notified (October 2025)	~13
Cement	Notified (October 2025)	~186
Chlor-Alkali	Notified (October 2025)	~30
Pulp and Paper	Notified (October 2025)	~53
Petroleum Refining	Notified (January 2026)	~25
Petrochemicals	Notified (January 2026)	~30
Textiles	Notified (January 2026)	~173
Iron and Steel	Draft notified (June 2026)	~255
Fertilizer	Pending	~35+

Net-Zero Deadlines

Indian companies are increasingly committing to net-zero targets. As these deadlines approach, the gap between current emissions and target emissions becomes more apparent — and the need for offsets more urgent.

International Pressure

Pressure Source	Impact
CBAM	Exporters face carbon border taxes
Global Supply Chains	Multinational buyers demand carbon compliance
Investor Expectations	ESG ratings increasingly factor in carbon performance

The Transition Reality

The transition would be gradual, as coal dependence will continue in several industrial sectors because viable alternative fuels remain limited.

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The CCTS Launch: A Structured Pathway for Offsets

The Compliance Market

Under the compliance market, administered by the Bureau of Energy Efficiency (BEE), companies are assigned emissions-intensity baselines under a baseline-and-credit mechanism. Targets initially cover eight sectors: cement, aluminium, chlor-alkali, pulp and paper, petrochemicals, petroleum refineries, fertilisers, and steel, which together account for more than 700 entities and roughly 20% of India's greenhouse gas emissions.

The Mechanism

Companies that outperform their emissions targets receive carbon credit certificates, while those that fall short must purchase credits to make up the difference. This creates a direct financial incentive for both abatement and offset procurement.

The Trading Infrastructure

The Central Electricity Regulatory Commission has issued regulations governing carbon credit transactions, with active trading expected to begin in the fourth quarter of 2026. The CERC CCC Regulations, 2026, were notified on 27 February 2026 and published in the Official Gazette on 3 March 2026 under Section 178 read with Section 66 of the Electricity Act, 2003.

What This Means for Companies

Implication	Action Required
Compliance Obligation	Meet targets or procure credits
Market Access	Register on the ICM Portal
Strategic Planning	Develop a compliance strategy

The Investment Window

November 2026 is the investment window. Carbon Credit Certificates are expected to be issued in October 2026, with trading beginning in November 2026. The numbers that matter: India's carbon market is estimated at $1.2 billion today.

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The Residual Emissions Problem: Why Abatement Alone Isn't Enough

What Are Residual Emissions?

Residual emissions are the emissions that remain after a company has implemented all cost-effective abatement measures. For many companies, these emissions are significant.

The Hard-to-Abate Challenge

Sector	Reason Residual Emissions Persist
Cement	Process emissions from calcination
Steel	Chemical reduction of iron ore
Fertiliser	Ammonia production emissions
Refineries	Complex process emissions

The Net-Zero Gap

Shuchi Malhotra, lead advisor for carbon markets at the Environmental Defense Fund, explained: "While you obviously do everything in your power as you decarbonise and reach your net zero goals, you also have a responsibility towards your ongoing emissions."

Why Offsets Are Necessary

Reason	Explanation
Technology Gaps	Some emissions cannot yet be eliminated
Cost Constraints	Some abatement is prohibitively expensive
Time Constraints	Net-zero targets require immediate action

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The Role of Carbon Credits: Complement, Not Substitute

The Core Principle

Malhotra emphasised a critical distinction: "Carbon credits are a complement to your overall decarbonisation journey. They are not a substitute."

What This Means in Practice

Principle	Application
Abatement First	Companies must reduce emissions internally
Offsets for Residual	Credits address emissions that cannot be eliminated
Continuous Improvement	Companies must continue reducing emissions over time

The International Consensus

International science-based standards are increasingly defining how companies can use credits alongside direct emissions reductions rather than in place of them. Governance bodies such as the Integrity Council for Voluntary Carbon Markets have established core principles covering additionality, permanence, accurate measurement, and the avoidance of double-counting.

The Structured Approach

The upcoming CCTS would give companies a structured way to manage residual emissions while they continue reducing emissions through operational changes. This structure provides regulatory certainty and market integrity.

The Greenwashing Concern

Corporate reluctance to buy carbon credits has reflected concerns that offsets could invite accusations of greenwashing. However, the growing governance framework and quality standards are addressing these concerns.

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The Governance Framework: Ensuring Credit Integrity

The Core Carbon Principles

Governance bodies such as the Integrity Council for Voluntary Carbon Markets have established core principles covering additionality, permanence, accurate measurement, and the avoidance of double-counting.

The ICVCM's Role

Principle	Description
Additionality	Projects would not have happened without carbon finance
Permanence	Carbon benefits are long-lasting
Accurate Measurement	Emission reductions are quantified correctly
No Double Counting	Each credit is counted only once

The CCTS Quality Framework

The CCTS compliance market operates under a baseline-and-credit mechanism with rigorous verification requirements. This ensures that credits represent genuine emission reductions.

The Role of Verification

Robust verification systems are critical for market credibility. Experts have cautioned that the market's success will hinge on credible price discovery, robust verification systems, and regulatory certainty. Without them, the market would lack the trust necessary for widespread participation.

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Challenges in the Transition from Abatement to Offsets

Challenge 1: Greenwashing Concerns

Corporate reluctance to buy carbon credits has reflected concerns that offsets could invite accusations of greenwashing.

Solution: Companies must ensure they are buying high-quality, verified credits and integrating them into a broader decarbonisation strategy.

Challenge 2: Quality Assurance

Not all carbon credits are created equal. Low-quality credits undermine the credibility of offset claims.

Solution: Companies must conduct rigorous due diligence and buy credits from reputable registries.

Challenge 3: Regulatory Uncertainty

The CCTS is still evolving. Companies face uncertainty about future regulations.

Solution: Companies should engage with the regulatory process and work with expert advisors.

Challenge 4: Pricing Volatility

Carbon prices can fluctuate significantly, creating financial uncertainty.

Solution: Companies should develop hedging strategies and consider early procurement.

Challenge 5: Capacity Building

Many companies lack the internal expertise to participate effectively in carbon markets.

Solution: Companies should invest in capacity building and work with experienced advisors.

Challenge 6: Coal Dependence

Coal dependence will continue in several industrial sectors because viable alternative fuels remain limited.

Solution: Companies should explore all available abatement options while developing offset strategies.

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Sector-by-Sector: Who Will Benefit Most from the Shift?

Cement

Factor	Implication
Hard-to-Abate	Significant residual emissions
CBAM Exposure	High exposure to carbon border taxes
CCTS Targets	Among the first sectors covered

Steel

Factor	Implication
Hard-to-Abate	Process emissions from ironmaking
CBAM Exposure	35.1% export decline in FY 2025
CCTS Targets	Draft notification covering 255 plants

Aluminium

Factor	Implication
Hard-to-Abate	Energy-intensive production
CBAM Exposure	Significant exposure
CCTS Targets	Growing compliance pressure

Fertiliser

Factor	Implication
Hard-to-Abate	95% of emissions from ammonia
CCTS Targets	Included among the eight sectors
Green Hydrogen	Significant decarbonisation potential

Refineries and Petrochemicals

Factor	Implication
Hard-to-Abate	Complex process emissions
CCTS Targets	Notified in January 2026
Green Hydrogen	Significant decarbonisation potential

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What This Means for Corporate ESG and BRSR Reporting

The BRSR Context

Company disclosures under the BRSR framework show firms have overwhelmingly focused on internal process changes rather than buying credits. This will need to change as offsets become a more significant part of corporate carbon strategies.

What to Report

Element	Description
Abatement Actions	Operational emissions reductions
Offset Purchases	Number and quality of credits purchased
Retirement Certificates	Proof of credit retirement
Net Emissions	Residual emissions after abatement and offsets

The Need for Transparency

Companies must be transparent about their use of carbon credits. Governance bodies have established core principles covering accurate measurement and the avoidance of double-counting.

The Future of ESG Reporting

As carbon markets mature, ESG reporting will increasingly need to account for both abatement and offset activities. Companies that can demonstrate a credible strategy combining both will be best positioned.

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The Financial Case for Carbon Credits

The Cost of Abatement vs. Offsets

Carbon credits can provide a cost-effective way to manage residual emissions when deep abatement is prohibitively expensive or technologically infeasible.

The Revenue Opportunity

Companies that outperform their targets can earn carbon credit certificates, creating a new revenue stream.

The Compliance Cost

Failure to comply with CCTS targets can result in significant financial penalties. Companies that fall short must purchase credits to make up the difference.

The Export Competitiveness Angle

Global standards recognize that companies must continue managing emissions even as they work towards long-term decarbonization. For exporters, carbon credits can help maintain competitiveness in carbon-constrained markets.

The Market Size

The India carbon credit market is estimated to be valued at USD 5.90 billion in 2026 and is expected to reach USD 66.79 billion by 2033, growing at a CAGR of 41.4%. India is among the biggest new carbon markets as global carbon pricing covers 29% of emissions.

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Our Services

Service	What We Do
Strategy Development	Help you develop a carbon management strategy combining abatement and offsets
Compliance Assessment	Understand your CCTS obligations and assess your position
Credit Procurement	Help you buy high-quality CCCs at the best price
Due Diligence	Verify credit quality, additionality, and registry status
Legal Documentation	Draft watertight purchase agreements and transfer deeds
ESG Reporting Support	Help you report on your carbon management activities

Why Choose Carboned.in?

Reason	Why It Matters
Legal Expertise	Led by Siddharth Gupta, Advocate, Calcutta High Court
Regulatory Knowledge	Deep understanding of CCTS, BEE, and CERC
Quality Focus	We only recommend high-quality, verified credits
End-to-End Support	From strategy to compliance, we guide you every step

Your first consultation is completely free. No obligation. Just honest advice.

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Conclusion: The Shift Has Begun

India Inc is at a turning point. The shift from abatement to offsets is not just a trend — it is a structural change driven by the CCTS launch, net-zero commitments, international pressure, and the cost-effectiveness of carbon credits.

Key Takeaways

Aspect	What You Need to Know
Current Approach	Companies have focused on abatement
The Shift	Companies will increasingly use offsets for residual emissions
CCTS Launch	Trading begins in Q4 2026
Key Principle	Credits complement, not substitute, emissions reductions
Market Size	USD 5.90B in 2026, growing to USD 66.79B by 2033

The Choice Is Yours

Option	Outcome
Act now	Develop a combined abatement and offset strategy, comply with CCTS, protect your reputation
Wait and see	Face higher costs, regulatory penalties, competitive disadvantage