India's Net-Zero 2070 Pathway – How Carbon Credits Are Bridging the Gap Between Ambition and Action

Introduction: The 2070 Promise

In 2021, at the COP26 climate summit in Glasgow, Prime Minister Narendra Modi made a historic commitment: India would achieve net-zero emissions by 2070 . This was not just another climate pledge. It was a fundamental reimagining of India's development trajectory—a commitment to decouple economic growth from carbon emissions.

The journey from ambition to action is now well underway. India has established a comprehensive and ambitious carbon market framework through the Carbon Credit Trading Scheme (CCTS) 2023, creating an integrated approach to carbon pricing that combines mandatory compliance mechanisms with voluntary offset generation under a unified regulatory structure .

But the gap between ambition and action remains vast. India's carbon credit market is estimated to be valued at USD 5.90 billion in 2026, surging to USD 66.79 billion by 2033—a CAGR of 41.4% . The CCTS currently covers approximately 490 entities across seven energy-intensive sectors, with coverage expanding to 740 entities and over 700 million tonnes of CO₂e .

Yet even this ambitious framework covers only a fraction of India's total emissions. The power sector, which accounts for nearly 40% of national emissions, sits outside the initial compliance boundary . The hard-to-abate sectors—cement, steel, and fertiliser—face challenges that no single policy can solve. And the financial resources required for the transition are measured in trillions, not billions.

This guide examines India's net-zero 2070 pathway, the role of carbon credits in bridging the gap between ambition and action, and what businesses must do to prepare for a carbon-constrained future.

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India's Climate Commitments: From NDCs to Net-Zero

The NDC Framework

India's climate commitments are anchored in its Nationally Determined Contributions (NDCs) under the Paris Agreement. India's enhanced NDCs call for:

Target	Description
Emissions Intensity Reduction	Reduce GHG emission intensity by 45% by 2030 from 2005 levels
Non-Fossil Capacity	60% of installed electricity capacity from non-fossil sources by 2035
Carbon Sink	Create an additional carbon sink of 3.5 to 4 billion tonnes of CO₂ equivalent

The Net-Zero Commitment

The Energy Conservation (Amendment) Act, 2022, represents India's strategic response to achieving its enhanced NDCs and ultimately achieving net-zero emissions by 2070 . This commitment is not just a political statement—it is embedded in India's legal and regulatory framework.

The Carbon Market as a Delivery Mechanism

The CCTS was notified in 2023 to create a domestic carbon credit market built on compliance and offset mechanisms . The scheme has the objective of reducing, removing, or avoiding greenhouse gas emissions from the Indian economy by pricing such emissions through the trading of Carbon Credit Certificates (CCCs) .

The Dual-Track Framework

The Indian Carbon Market architecture is characterised by a dual-track system that operates through two distinct but complementary mechanisms :

Mechanism	Description
Compliance Mechanism	Mandatory "baseline-and-credit" system targeting obligated entities from nine energy-intensive sectors
Offset Mechanism	Enables non-obligated entities across diverse sectors to voluntarily develop projects

The Compliance Timeline

Milestone	Date
CCTS Notified	June 2023
Compliance Obligations in Force	April 1, 2025
Phase 1 Targets Notified	October 2025
Phase 2 Targets Notified	January 2026
First Compliance Deadline	July 31, 2026
First CCC Trading	Q4 2026

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The Emissions Gap: Why Abatement Alone Won't Get Us There

The Scale of the Challenge

India is the world's third-largest emitter of greenhouse gases. The country's emissions are growing as the economy expands, and the challenge of decoupling growth from emissions is immense.

The CCTS covers approximately 477 million tCO₂e in its current phase, making it one of the world's largest newly implemented carbon pricing systems . But this represents only a fraction of India's total emissions.

The Abatement-First Reality

For Indian corporations, decarbonisation strategies have so far prioritised direct operational abatement over market offsets. Nikunj Dube, chief ratings officer for ESG Ratings at CareEdge, noted that 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 .

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

The Residual Emissions Problem

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" .

Malhotra reiterated that credits should complement, not replace, direct emissions reductions. "Carbon credits are a complement to your overall decarbonization journey. They are not a substitute" .

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The Role of Carbon Credits in the Net-Zero Journey

The Complement, Not Substitute Principle

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 . These principles ensure that carbon credits represent real, additional, and permanent emission reductions.

How Carbon Credits Bridge the Gap

Gap	How Carbon Credits Help
Technology Gaps	Credits finance the deployment of new technologies
Cost Gaps	Credits make expensive abatement financially viable
Time Gaps	Credits address emissions while long-term solutions are developed
Residual Emissions	Credits offset emissions that cannot be eliminated

The Shift from Abatement to Offsets

With active trading under the CCTS scheduled to begin 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 .

The Transition Will Be Gradual

Transition would be gradual, as coal dependence will continue in several industrial sectors because viable alternative fuels remain limited . Companies will need to balance abatement and offsets as they work toward net-zero.

International Science-Based Standards

International science-based standards are increasingly defining how companies can use credits alongside direct emissions reductions rather than in place of them . This provides a credible framework for corporate use of carbon credits.

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The CCTS as the Engine of Decarbonisation

The Institutional Framework

The CCTS operates through a three-tier institutional structure:

Institution	Role
Bureau of Energy Efficiency (BEE)	Administrator—designs procedures, manages registration, oversees transfers
Grid Controller of India	Registry—maintains electronic accounts, tracks CCCs
Central Electricity Regulatory Commission (CERC)	Regulator—sets price bands, oversees market operations

The Compliance Mechanism

Under the compliance market, companies are assigned emissions-intensity baselines under a baseline-and-credit mechanism. Targets initially cover eight sectors such as 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 Baseline-and-Credit System

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 Offset Mechanism

Complementing the compliance approach, the offset mechanism enables non-obligated entities across diverse sectors to voluntarily develop projects that reduce, remove, or avoid GHG emissions, thereby generating tradable CCCs .

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 .

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The Hard-to-Abate Challenge: Cement, Steel, and Fertiliser

Cement: The Chemistry Problem

Cement manufacturing is one of the most carbon-intensive industrial processes. Approximately 60% of cement emissions come from the chemical process itself—the calcination of limestone into clinker releases CO₂ as a byproduct. Even if a cement plant switches entirely to renewable energy, it still cannot eliminate its core process emissions.

Steel: The 255-Plant Expansion

India has notified draft emission-intensity targets for 255 iron and steel units under the CCTS . This brings the world's second-largest steel producer formally into the carbon market from FY 2026-27 .

The notified targets encompass 255 units, with combined baseline emissions of 358.6 million tonnes of CO₂ equivalent (MtCO₂e) across all units . 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 .

Fertiliser: The Ammonia Challenge

The fertiliser sector emits approximately 25 million tonnes of CO₂ annually, with 95% of these emissions coming from ammonia production. Green hydrogen offers a transformative solution, but requires significant investment and policy support.

The Decarbonisation Pathways

Sector	Primary Pathways
Cement	Blended cement, alternative fuels, CCUS
Steel	Scrap-based EAF, green hydrogen DRI, CCUS
Fertiliser	Green hydrogen, energy efficiency

The Role of Carbon Credits

For these hard-to-abate sectors, carbon credits will play a critical role in managing residual emissions while long-term technological solutions are developed and scaled.

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The Power Sector: The Missing Piece of the Puzzle

The Scale of the Gap

The power sector accounts for nearly 40% of national emissions and sits outside the initial CCTS compliance boundary . Its eventual integration will require careful attention to electricity market regulation, dispatch decisions, cost recovery, and regulatory coordination .

Why the Power Sector Matters

In other carbon markets, power utilities are among the most active participants, and fuel-switching dynamics between coal and gas are among the strongest drivers of carbon price movements. Their initial absence will concentrate compliance demand among industrial firms whose trading may cluster around settlement deadlines.

The Integration Timeline

Phase	Timeline	Status
Phase 1	2026-2027	Power sector excluded
Phase 2	2028-2030	Power sector integration planned
Phase 3	2030+	Full integration

The IEEFA's Warning

The IEEFA report emphasises that without a credible integration roadmap, the CCTS will lack the primary channel through which carbon pricing shapes energy investment .

The Opportunity

India has the advantage of learning from the costly missteps of earlier movers. The CCTS can design a power sector integration pathway that avoids the problems faced by other markets.

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The Residual Emissions Problem: What Net-Zero Really Means

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 Reality

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 Role of Offsets

As Malhotra 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" . Offsets address these ongoing emissions while companies work toward long-term decarbonisation.

The 2070 Timeline

Decade	Focus
2020s	Building the framework, early compliance
2030s	Scaling abatement, expanding coverage
2040s	Deep decarbonisation, technology deployment
2050s	Near-zero emissions, residual offsetting
2060s	Final push to net-zero

The Net-Zero Definition

Net-zero means that any remaining emissions are balanced by removals. This is where carbon credits—particularly removal credits like biochar and Enhanced Rock Weathering—play an essential role.

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The International Dimension: CBAM and Global Competitiveness

The CBAM Reality

India's steel and aluminium exports to the European Union (EU) fell 24.4% in financial year (FY) 2025, with steel alone down 35.1%, before any Carbon Border Adjustment Mechanism (CBAM) financial obligation had taken effect .

What This Means

The decline, which suggests European buyers are already reorienting toward lower-emission producers, underscores what is at stake as India's CCTS enters its operational phase .

The CCTS Shield

A credible domestic carbon market can strengthen India's long-term industrial competitiveness, regardless of how discussions on the EU's CBAM evolve . International experience points to the design choices—from benchmark calibration to the eventual role of auctioning—that shape how much carbon value is retained at home .

The India-EU FTA CBAM Annexure

India has secured an Annex on Carbon Border Measures in the India-EU FTA which establishes a Technical Dialogue on:

• Product scope and embedded emissions coverage
• Monitoring, reporting and verification processes
• The possibility to take into account the carbon price effectively paid
• Exploring mutual recognition of accreditation bodies

The Strategic Imperative

A strong domestic carbon market is not just about compliance—it is about protecting India's export competitiveness in a carbon-constrained world.

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The 2070 Timeline: A Decade-by-Decade Roadmap

The Three Stages of CCTS Development

The IEEFA identifies three stages of CCTS development that will shape India's net-zero journey :

Stage	Timeline	Key Features
Phase 1	2026-2027	Introduction of CCTS, deciding policy framework, establishing MRV standards
Phase 2	2028-2030	Expanding sectoral scope, integrating financial markets, designing offsets
Phase 3	2030+	Transition to absolute emissions cap, introduction of auctioning

The 2030 Milestones

Milestone	Target
Emissions Intensity	45% reduction from 2005 levels
Non-Fossil Capacity	60% of installed capacity
Carbon Sink	3.5 to 4 billion tonnes CO₂ equivalent
CCTS Coverage	740+ entities, 700+ million tCO₂e

The 2040-2050 Horizon

Development	Timeline
Absolute Emissions Cap	Transition from intensity-based to absolute cap
Auctioning	Competitive allocation of allowances
Power Sector Integration	Full integration of the power sector
Financial Market Maturity	Deep liquidity, hedging instruments

The 2070 Goal

Net-zero emissions across the entire economy. This requires:

• Near-zero emissions from all sectors
• Significant carbon removal through nature-based and technological solutions
• A mature, globally integrated carbon market

The Window of Opportunity

As the IEEFA notes, determining the CCTS's trajectory now is sequencing choices, and the window to shape them is open before path dependencies harden . Priority should go to foundational elements: credible stringency, robust MRV, and genuine enforcement .

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The Investment Required: Trillions, Not Billions

The Scale of Investment Needed

India's transition to net-zero will require trillions of dollars in investment across energy, industry, transport, and agriculture. The carbon market alone cannot finance this transition, but it can mobilise private capital and create price signals that guide investment decisions.

The Carbon Market Contribution

The India carbon credit market is estimated to be valued at USD 5.90 billion in 2026, surging to USD 66.79 billion by 2033—a CAGR of 41.4% . Other forecasts suggest even higher trajectories, reaching tens of billions by 2030 .

The Investment Opportunity

Sector	Investment Need
Renewable Energy	Trillions for solar, wind, and storage
Industrial Decarbonisation	Billions for efficiency, fuel switching, CCUS
Green Hydrogen	Significant investment in production and infrastructure
Carbon Removal	Billions for nature-based and technological removals

The Role of Financial Institutions

Every major ETS has begun with compliance entities only, and the CCTS is well placed to do the same. Financial intermediation is what eventually turns a compliance market into one with continuous price discovery and hedging . The legal framework for it already exists in India .

The Green Finance Opportunity

Green and sustainability-linked bonds and loans are emerging as popular sustainable finance instruments. Indian corporates are increasingly turning to these instruments to fund their transitions.

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The Role of Financial Institutions in the Transition

The Current State

Currently, participation in the CCTS is limited to compliance entities, non-obligated entities, and power exchanges. Financial institutions—banks, brokers, and investment funds—are not yet active participants.

The Future State

As the IEEFA notes, "Every major emissions trading system (ETS) has begun with compliance entities only, and the CCTS is well placed to do the same" . Financial intermediation is what eventually turns a compliance market into one with continuous price discovery and hedging .

The Three Types of Financial Participants

Type	Role	Timing
Brokers	Connect buyers and sellers	Phase 2
Banks	Lend against carbon assets	Phase 2
Investment Funds	Invest in carbon credits	Phase 2-3

The Financial Sector's Role

Function	Description
Market Making	Providing continuous bid-ask spreads
Hedging	Enabling price risk management
Financing	Lending against carbon assets
Investment	Investing in carbon credits and projects

The PCAF-CII Partnership

In July 2026, the Partnership for Carbon Accounting Financials (PCAF) and the Confederation of Indian Industry - Centre of Excellence for Sustainable Development (CII-CESD) entered into a strategic partnership to support financial institutions in India with the measurement and disclosure of emissions associated with financial activities.

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What Businesses Must Do Now

For Obligated Entities

Action	Why It Matters
Calculate Baseline	Know your 2023-24 emission intensity
Understand Targets	Know your notified targets
Assess Gap	Calculate your compliance position
Develop Strategy	Plan abatement and offset procurement
Register on ICM Portal	Required for participation

For Non-Obligated Entities

Action	Why It Matters
Identify Opportunities	What projects can you develop?
Select Methodology	Choose the right methodology
Develop Project	Prepare PDD and engage stakeholders
Register Project	Register on the ICM Portal
Monetise Credits	Sell credits to obligated entities or voluntary buyers

For All Businesses

Action	Why It Matters
Monitor Policy	Track regulatory developments
Build Capacity	Develop internal expertise
Engage Stakeholders	Work with suppliers, customers, and regulators
Seek Advice	Engage professional advisors

The Long-Term Perspective

Over the next two to five years, choices made by regulators, policymakers, and market participants on market architecture, compliance obligations, and price formation will shape how far the CCTS develops into a market capable of guiding capital-intensive industrial investment over 15- to 30-year horizons .

Conclusion: The Journey of a Thousand Miles

India's net-zero 2070 journey is a journey of a thousand miles. The first steps have been taken—the CCTS is operational, the ICM Portal is live, and trading is about to begin. But the journey is long, and the challenges are immense.

Key Takeaways

Aspect	What You Need to Know
Net-Zero Target	2070
NDC Target	45% emissions intensity reduction by 2030
CCTS Coverage	490 entities, 477 million tCO₂e (expanding to 740+, 700M+)
Trading Launch	Q4 2026
Market Size	USD 5.90B in 2026, USD 66.79B by 2033
Key Principle	Credits complement, not substitute, emissions reductions
CBAM Impact	24.4% export decline in FY 2025

The Choice Is Yours

Option	Outcome
Act now	Position your business for the net-zero transition, comply with CCTS, protect export competitiveness
Wait and see	Face higher costs, regulatory penalties, competitive disadvantage