CCTS Expansion 2026 – Iron, Steel, and the Future of India's Compliance Carbon Market
Introduction: The Next Frontier of CCTS
The Carbon Credit Trading Scheme (CCTS) has reached a critical milestone. On June 26, 2026, the Ministry of Environment, Forest and Climate Change (MoEFCC) issued a draft notification proposing to bring the iron and steel sector under mandatory greenhouse gas (GHG) emission intensity targets. This marks the expansion of India's compliance-based carbon market to the country's largest industrial emitter.
The draft notification, published in the Official Gazette on July 2, 2026, sets emission reduction targets for 255 industrial units, including the sector's giants such as JSW Steel, Tata Steel, Steel Authority of India (SAIL), ArcelorMittal Nippon Steel India, and others. With a combined baseline emissions of 358.6 million tonnes of CO2 equivalent (MtCO2e) across all units, this is the largest sectoral expansion of the CCTS to date.
This is not a minor update. It is a fundamental expansion of India's carbon market. The iron and steel sector accounts for an estimated 12% of India's total greenhouse gas emissions and is the country's largest industrial emitter. Bringing this sector under the CCTS transforms the scheme from a policy framework into a working compliance market for hard-to-abate industries.
This guide provides a comprehensive analysis of the CCTS expansion to iron and steel, explaining what the draft notification means, who is affected, what the targets are, and what steel producers must do to prepare.
Why Iron and Steel? The Sector's Emissions Profile
The Scale of the Challenge
India is the world's second-largest steel producer, with an approximate crude steel production of 151 million tonnes in FY 2024-25. The country is looking to expand its steel capacity from 180 million tonnes to 300 million tonnes by 2030, driven by infrastructure and development needs.
However, this growth comes at a significant environmental cost. The steel sector contributes 10-12% of India's total CO2 emissions and accounts for approximately 39% of the country's industrial emissions.
India's Emissions Intensity Problem
India's steel sector is not only large—it is also relatively inefficient. As of 2023-24, the average emission intensity per tonne of crude steel produced in India was 2.54 tonnes of CO2, while the global average stands at 1.9 tonnes of CO2. This gap represents both a challenge and an opportunity for improvement.
Why the Sector Was Prioritized
The government prioritized iron and steel for several reasons:
| Reason | Explanation |
|---|---|
| High Emissions Intensity | Steel is one of the most carbon-intensive industrial products |
| Scale of Production | India is the world's second-largest steel producer |
| Export Exposure | Steel exports to Europe face increasing CBAM pressure |
| Abatement Potential | While hard-to-abate, there are proven technologies to reduce emissions |
| National Steel Policy | Supports India's goal of 2.2 tCO₂ per tonne of crude steel by 2030 |
The Global Context
The timing of this expansion is significant. India's steel and aluminium exports to the European Union fell 24.4 percent in FY 2025, with steel alone down 35.1 percent—before any CBAM financial obligation had taken effect. European buyers are already reorienting toward lower-emission producers. A functioning CCTS with verifiable intensity data is the main lever India has to keep those buyers from writing Indian mills out of their supply chains.
The Draft Notification: Key Provisions and Timeline
The Legal Basis
The draft notification has been issued under Sections 3, 6 and 25 of the Environment (Protection) Act, 1986. It proposes amendments to the Greenhouse Gases Emission Intensity Target Rules, 2025, introducing a new Third Schedule that sets plant-wise GHG emission intensity targets for iron and steel manufacturers.
Key Provisions
| Provision | Details |
|---|---|
| Number of Units | 255 iron and steel units |
| Baseline Year | 2023-24 |
| Compliance Year | 2026-27 |
| Unit of Measurement | Tonnes of carbon dioxide equivalent (tCO₂e) per tonne of equivalent product |
| Public Comment Period | 60 days from publication in the Official Gazette |
The Timeline
| Date | Event |
|---|---|
| June 23, 2025 | First draft targets for iron and steel released |
| January 2026 | Final targets for other sectors notified (excluding iron and steel) |
| June 26, 2026 | Revised draft notification issued |
| July 2, 2026 | Draft made public |
| 60 days from publication | Public comment period |
| 2026-27 | Compliance year |
The Delay and Its Implications
The June 2026 notification is the second attempt at issuing compliance targets for the sector. The delay has resulted in skipping the first compliance year of FY 2025-26 in its entirety, although the targets for FY 2026-27 see limited change from the previous draft. This means iron and steel producers have less time to prepare for their first compliance obligation.
Emission Intensity Targets for Steel: The Numbers
The Target Range
The required reduction in emission intensity ranges from 2.1% to 9.3% across various types of steel entities, with a median target of around 5.5%. Consistent with the benchmarking approach, plants with higher baseline emission intensities (above 3 tCO₂e per tonne of equivalent product) have been assigned steeper percentage reductions than relatively efficient plants.
Understanding the Targets
| Metric | Value |
|---|---|
| Average Indian emission intensity (2023-24) | 2.54 tCO₂ per tonne of crude steel |
| Global average emission intensity | 1.9 tCO₂ per tonne of crude steel |
| Target reduction range | 2.1% – 9.3% |
| Median target | ~5.5% |
| Combined baseline emissions | 358.6 MtCO₂e |
Plant-Level Targets
Among the obligated entities, 75 sites have been assigned emission intensity targets of 2.2 tCO₂e or lower per tonne of equivalent product. Together, these sites produced 39.97 Mt in FY 2023-24, accounting for 26.88% of the total production covered under the mechanism. While this is numerically comparable to the threshold under India's Green Steel Taxonomy, direct comparison requires detailed assessment of each unit's operational nature.
The Moderate Nature of the Targets
The targets have been characterised as moderate. Leading steel producers would need to reduce emissions intensity by only 2% to 5% by FY 2026-27, creating limited pressure for real technological change. The targets are likely to drive improvements through relatively low-cost operational measures rather than major technology shifts.
The 255 Units Covered: Who Is Affected?
Major Integrated Steel Producers
The draft notification covers some of India's largest producers:
| Company | Location |
|---|---|
| Tata Steel | Jharkhand |
| JSW Steel | Karnataka |
| Steel Authority of India Ltd. (SAIL) | Multiple locations |
| ArcelorMittal Nippon Steel India | Multiple locations |
| Rashtriya Ispat Nigam Ltd. (RINL) | Andhra Pradesh |
| Jindal Steel & Power | Chhattisgarh |
Diverse Production Routes
The notification also covers numerous sponge iron, alloy steel, and secondary steel producers across states such as Odisha, Chhattisgarh, Karnataka, Jharkhand, West Bengal, Andhra Pradesh, Gujarat, Maharashtra, Tamil Nadu and Telangana.
What This Means
Each obligated entity has been assigned a baseline emission intensity based on its 2023-24 performance and corresponding emission intensity targets that must be achieved during the compliance years. Companies that outperform their targets will be eligible to generate carbon credit certificates, while entities failing to meet their prescribed limits may be required to purchase carbon credits under the compliance mechanism.
Sector Structure: The Challenge of Diverse Production Routes
The Diversity Problem
The iron and steel sector is characterised by a diverse value chain, ranging from upstream ironmaking and sponge iron production to downstream steelmaking, rolling, and finishing operations. Different production routes have vastly different emission profiles:
| Production Route | Description | Emission Intensity |
|---|---|---|
| Blast Furnace (BF) | Traditional coal-based route | High |
| Direct Reduced Iron (DRI) | Gas-based or coal-based | Medium-High |
| Electric Arc Furnace (EAF) | Scrap-based | Lower |
| Induction Furnace (IF) | Scrap-based, coal-dependent | Variable |
The Lack of Sub-Classification
Unlike the cement and other sectors, where facilities are categorised based on their production processes, the steel notification does not classify sites by sub-sector or process type, making it difficult to understand the operational characteristics of the obligated sites. In a sector with diverse technology routes, greater granularity would be meaningful for assessment.
The Shifting Technology Mix
Since 2019-20, the share of the more emission-intensive IF route (dependent on coal-based DRI) has increased from 29.5% to 35.4%, while the EAF route has declined from 26.0% to 21.9% (2024-25). At the same time, a Global Energy Monitor report shows that over 90% of planned steelmaking capacity in India is relying on coal. This trend has significant implications for the sector's future emissions trajectory.
The Need for Future Tightening
Future compliance cycles need emission targets that strongly signal towards preventing long-term carbon lock-in and accelerating the adoption of low-carbon production routes. The success of India's steel transition will depend not only on reducing emissions from the existing fleet but also on shaping future investments.
Compliance Pathways for Steel Producers
Pathway 1: In-House Reduction
Steel producers have several levers to reduce emission intensity:
| Lever | Description | Potential Impact |
|---|---|---|
| Blast furnace efficiency | Optimising furnace operations | Moderate |
| Heat recovery | Capturing and reusing waste heat | Moderate |
| Power mix | Increasing renewable energy use | Moderate |
| Scrap ratio | Increasing scrap usage | Significant |
| Digital MRV | Enhanced monitoring and optimisation | Moderate |
| DRI process optimization | Efficiency improvements | Moderate |
For an integrated steel plant, the target affects more than carbon cost. It reaches into process choices such as blast furnace efficiency, heat recovery, power mix, scrap ratio, and digital MRV.
Pathway 2: Credit Procurement
Entities that fall short of their targets may be required to purchase Carbon Credit Certificates from the domestic market. This creates a financial incentive to reduce emissions while providing a compliance pathway for those that cannot achieve the required reductions in the short term.
The Economic Logic
If the target is tighter than the 2023-24 baseline, a steel producer may need to buy credits or invest in efficiency. If it beats the target, it can generate Carbon Credit Certificates with monetary value. That is the direct link between compliance and operating margin.
The Real Test
According to Parth Kumar of the Centre for Science and Environment's Sustainable Industrialisation Unit, the initial targets are likely to drive improvements through energy efficiency and other relatively low-cost operational measures. The real test will be whether future compliance cycles begin to influence long-term investment decisions and accelerate the adoption of low-carbon technologies that bring about a deeper, structural shift in the sector's emissions trajectory.
CBAM and Steel Exports: The Urgent Connection
The CBAM Reality
The Carbon Border Adjustment Mechanism (CBAM) is the European Union's carbon tariff on imports. It came into effect on January 1, 2026, placing a carbon price on emissions from highly traded, carbon-intensive products including steel.
The Numbers Are Stark
India's steel and aluminium exports to the European Union fell 24.4 percent in FY 2025, with steel alone down 35.1 percent—before any CBAM financial obligation had taken effect.
Why This Matters for Steel Producers
| Factor | Implication |
|---|---|
| Export Dependence | In FY2024, India exported 7.5 million tonnes of steel, of which 3.3 million tonnes were to Europe—accounting for 44% of total steel exports |
| CBAM Costs | CBAM charges estimated at €65-70 per tonne of CO₂ |
| Competitive Disadvantage | Indian steel producers face higher costs than EU producers |
| Market Access Risk | Continued non-compliance may lead to loss of European market |
How CCTS Can Help
CCTS compliance provides verifiable evidence of carbon reduction. This can:
- Demonstrate carbon compliance to EU buyers
- Potentially reduce CBAM liability
- Maintain export competitiveness
- Access premium markets that value sustainability
The Strategic Imperative
As the world's second-largest steel producer, the choices made today will shape the sector's emissions trajectory for decades to come. The CCTS expansion to steel is not just a domestic compliance matter—it is a matter of export survival.
The Revisions: What Changed from the Previous Draft?
The First Draft (June 2025)
The first draft targets for the iron and steel sector were released on June 23, 2025, alongside draft targets for secondary aluminium, petroleum refinery, petrochemicals, and textile sectors.
The Revised Draft (June 2026)
The June 2026 notification introduces both structural and numerical revisions:
| Change | Details |
|---|---|
| Recalibration | Nearly half of the covered steel units have revised baseline emissions, fundamentally reshaping plant-level compliance targets |
| Target Relaxation | 75 units show a target relaxation below 0.1% (minuscule) |
| Target Tightening | 24 units see the targets tightened between 0.1% and 2.5% from the previous draft |
| 2025-26 Blank | The 2025-26 column has been left blank |
| Compliance Year | Targets set only for 2026-27 |
The Missing Explanation
The ministry has issued the revised draft without any explanation for the fresh draft. This lack of transparency has been noted by industry observers and stakeholders.
The Structural Change
Unlike the cement sector, India's steel notification does not classify units by process or sub-sector. This makes it difficult to understand the operational characteristics of the obligated sites and assess the appropriateness of the targets.
Challenges and Criticisms
Challenge 1: Moderate Targets
The targets have been characterised as too modest to drive significant industrial decarbonization. Leading steel producers would need to reduce emissions intensity by only 2% to 5% by FY 2026-27, creating limited pressure for real technological change.
Challenge 2: Lack of Sub-Classification
The absence of sub-sector or process-type classification makes it difficult to assess whether the targets are appropriate for different production routes. In a sector with diverse technology routes, greater granularity is essential.
Challenge 3: Delay and Uncertainty
The delay in finalising targets for the steel sector has resulted in skipping the first compliance year of FY 2025-26. This creates uncertainty for steel producers who need to plan long-term investments.
Challenge 4: CBAM Pressure
Indian steel exporters face increasing costs from CBAM. Without aggressive emissions reduction, they risk losing access to the European market.
Challenge 5: Technology Lock-In
With over 90% of planned steelmaking capacity in India relying on coal, there is a risk of long-term carbon lock-in. Future compliance cycles will need to signal strongly towards low-carbon production routes.
The Future of CCTS: What Comes Next
Sector Expansion
The iron and steel draft is part of a broader rollout that is already under way. By January 2026, the compliance mechanism covered 490 obligated entities across energy-intensive sectors, after an initial wave of 282 entities in 2025 and a further expansion to 208 more in January 2026.
Fertilizer Sector Pending
Final targets for the fertilizer sector are still pending. Once notified, the CCTS will cover all nine hard-to-abate sectors: iron and steel, cement, aluminium, fertilisers, petrochemicals, textiles, pulp and paper, chlor-alkali, and refineries.
The Role of the Indian Carbon Market Portal
On March 21, 2026, Power Minister Manohar Lal Khattar launched the Indian Carbon Market Portal at the Prakriti 2026 International Conference on Carbon Markets in New Delhi. The portal serves as the central digital backbone of the Indian Carbon Market, enabling end-to-end processes from entity registration to the issuance of CCCs.
Trading Timeline
Trading of carbon credits under the compliance mechanism is expected to begin in 2026-27. The trading of CCCs is expected to begin in 2026.
How Carboned.in Can Help
At Carboned.in, we help steel producers navigate the CCTS expansion with clarity and confidence.
Our Services
| Service | What We Do |
|---|---|
| Compliance Assessment | Understand your obligations and assess your position |
| Gap Analysis | Calculate your shortfall and develop a mitigation strategy |
| Emission Reduction Planning | Identify cost-effective reduction opportunities |
| Credit Procurement | Help you buy CCCs at the best price |
| CBAM Readiness | Assess your exposure and develop a mitigation strategy |
| Legal Documentation | Draft watertight agreements and handle regulatory filings |
Why Choose Carboned.in?
| Reason | Why It Matters |
|---|---|
| Legal Expertise | Led by Siddharth Gupta, Advocate, Calcutta High Court |
| Regulatory Knowledge | Deep understanding of CCTS, MoEFCC, and CBAM |
| Sector Experience | Knowledge of the steel sector's unique challenges |
| End-to-End Support | From assessment to compliance |
Your first consultation is completely free. No obligation. Just honest advice.
Frequently Asked Questions
When was the draft notification for iron and steel issued?+
June 26, 2026.
How many iron and steel units are covered?+
255 units.
What is the baseline year?+
2023-24.
What is the compliance year?+
2026-27.
What is the required reduction range?+
2.1% to 9.3%, with a median target of around 5.5%.
What is the combined baseline emissions of the covered units?+
358.6 million tonnes of CO₂ equivalent (MtCO₂e).
Who are the major companies covered?+
Tata Steel, JSW Steel, SAIL, ArcelorMittal Nippon Steel India, Jindal Steel & Power.
Why was the sector delayed?+
The June 2026 notification is the second attempt, resulting in skipping the first compliance year of FY 2025-26.
What is the difference from the cement sector?+
Unlike cement, the steel notification does not classify units by process or sub-sector.
What is the CBAM connection?+
Steel exports to the EU fell 35.1% in FY 2025 before CBAM even imposed financial obligations.
How can steel producers avoid penalties?+
Meet targets through in-house reduction or purchase CCCs.
What happens if a company outperforms its target?+
It can generate Carbon Credit Certificates with monetary value.
What is the public comment period?+
60 days from publication in the Official Gazette.
When will trading begin?+
Expected in 2026-27.
How can Carboned.in help?+
We provide compliance assessment, gap analysis, credit procurement, and CBAM readiness support.
Siddharth Gupta is the founder of Carboned.in and specialist counsel for India's carbon compliance framework — advising obligated entities, project developers, and buyers on CCTS, CR-I registration, and credit transactions.
Related Articles
The July 31, 2026 CCTS Deadline – A Complete Compliance Guide for Obligated Entities
Form A Filing Under CCTS – Everything You Need to Know Before the Deadline
