Petroleum Refining and Petrochemicals Under CCTS – Compliance Strategies for India's Oil & Gas Giants

Introduction: The Oil & Gas Sector's Carbon Moment

India's petroleum refining and petrochemical sectors are among the country's largest industrial emitters. They are also among its most strategic industries, powering the economy and supplying the building blocks for countless products.

On January 13, 2026, the Ministry of Environment, Forest and Climate Change (MoEFCC) issued a landmark notification bringing petroleum refineries, petrochemicals, textiles, and secondary aluminium under the compliance mechanism of the Indian Carbon Market (ICM).

The notification added 208 obligated entities to the CCTS, including 21 petroleum refineries and 11 petrochemical units. With this expansion, the compliance mechanism now covers 490 obligated entities across India's most emission-intensive industries.

For India's oil and gas giants — Reliance Industries, Indian Oil, BPCL, HPCL, and others — this is a pivotal moment. Compliance is no longer optional. It is the law.

This guide provides a comprehensive analysis of what petroleum refining and petrochemical companies must know about CCTS compliance, the unique challenges they face, and the strategies they can adopt to not only meet their obligations but also generate value from the carbon market.

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The Notification: What Changed on January 13, 2026

The Notification

On 13 January 2026, the Government of India notified Greenhouse Gas Emission Intensity (GEI) targets for additional carbon-intensive sectors under the CCTS. The notification brought four sectors under the compliance mechanism:

Sector	Entities Added
Petroleum Refineries	21 entities
Petrochemicals	11 entities
Textiles	173 entities
Secondary Aluminium	3 entities
Total	208 entities

The Broader Context

This notification followed the first phase of GEI targets in October 2025, which covered aluminium, cement, chlor-alkali, and pulp and paper sectors (282 entities).

With this second notification, the total number of entities covered by the mandatory GEI targets reached 490. These are individual units — factories — of many companies in the named industries.

What This Means for Oil & Gas Companies

Implication	Explanation
Legally binding obligations	Targets are not voluntary; they are the law
Retroactive application	Obligations apply from April 1, 2025
Compliance deadlines	First compliance date is July 31, 2026
Financial consequences	Non-compliance triggers Environmental Compensation penalties

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Which Companies Are Covered?

Petroleum Refineries: 21 Entities

The 21 petroleum refineries covered include major facilities operated by:

Company	Key Refineries
Reliance Industries	Jamnagar (world's largest refining complex)
Indian Oil Corporation	Koyali, Panipat, Mathura, Digboi, Guwahati
Bharat Petroleum Corporation Ltd (BPCL)	Mumbai, Kochi
Hindustan Petroleum Corporation Ltd (HPCL)	Mumbai, Visakhapatnam
Nayara Energy	Vadinar
Chennai Petroleum Corporation Ltd (CPCL)	Manali

Petrochemicals: 11 Units

The 11 petrochemical units covered include major facilities such as:

Company	Key Petrochemical Units
Reliance Industries	Multiple petrochemical complexes
GAIL	Petrochemical facilities
ONGC Petro additions	Various units

The Coverage Pattern

The notification applies to individual units — factories — of many companies. A company with multiple refineries or petrochemical units may have some, but not all, of its facilities covered.

What This Means for Companies

Action	Why It Matters
Check coverage	Confirm which of your units are obligated
Understand plant-specific targets	Each unit has its own target
Develop unit-level strategies	Compliance is assessed at the unit level

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The Scope of Emissions: Process Emissions and Fugitives

The Challenge of Refining Emissions

Petroleum refining and petrochemical production are among the most complex industrial processes to decarbonise. The emissions arise from multiple sources:

Source Type	Description	Examples
Combustion emissions	Burning fossil fuels for process heat	Furnaces, boilers, heaters
Process emissions	Chemical reactions that release CO₂	Catalytic cracking, reforming
Fugitive emissions	Leaks from valves, pumps, and flanges	Methane, VOCs
Indirect emissions	Purchased electricity and steam	Scope 2 emissions

The CCTS Scope

The CCTS initially covers CO₂ and perfluorocarbons (PFCs) for the compliance mechanism. For petroleum refining, this primarily means:

• Scope 1: Direct emissions from fuel combustion and process operations
• Scope 2: Indirect emissions from electricity and steam consumption

The Fugitive Emissions Challenge

Fugitive emissions — leaks from equipment — are a significant source of emissions in petroleum refining. Measuring and controlling fugitive emissions is a critical compliance task.

Action	Why It Matters
Leak detection and repair (LDAR)	Reduces fugitive emissions
Monitoring equipment	Tracks emissions in real time
Verification readiness	Ensures data is audit-ready

The Petrochemical Challenge

Petrochemical production involves energy-intensive chemical processes that can have high carbon intensity. The specific processes vary by product, but common challenges include:

• Steam cracking: Highly energy-intensive
• Ammonia production: High CO₂ emissions (covered under fertilizer sector)
• Methanol production: Significant process emissions

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The Compliance Timeline: Key Dates

The Overall CCTS Timeline

Milestone	Date
CCTS Notified	June 2023
Detailed Regulation Adopted	July 2024
Phase 1 Targets Notified	October 2025
Phase 2 Targets Notified	January 13, 2026
Compliance Obligations in Force	April 1, 2025
First Compliance Deadline	July 31, 2026
First CCC Trading	Q4 2026 (October-December)

The Retroactive Application

Compliance obligations apply retroactively from April 1, 2025. This means that even though targets were notified in January 2026, refineries and petrochemical units are already obligated to comply with their targets — using FY 2023-24 as the baseline.

The Trading Window

Event	Timeline
First CCC Issuance	October 2026
First Trading	November 2026 – January 2027

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How the CCTS Compliance Mechanism Works

The Baseline-and-Credit System

The CCTS operates as an intensity-based baseline-and-credit system. Under this system:

1. Baseline: Each unit is assigned a baseline GEI based on its FY 2023-24 performance
2. Target: Each unit is assigned a target GEI for FY 2025-26 and FY 2026-27
3. Performance: Each unit monitors and reports its emissions intensity
4. Compliance: Each unit must meet its target or purchase CCCs
5. Reward: Units that outperform their targets earn CCCs

The Intensity Metric

Emission Intensity = Total GHG Emissions (tCO₂e) / Total Output (units)

For refineries, the output metric may be:

• Tonnes of crude oil processed
• Tonnes of petroleum products produced

For petrochemical units, the output metric may be:

• Tonnes of specific chemicals produced

The Phased Targets

Year	Reduction Requirement	Context
FY 2025-26	~40% of total target	Transition year, manageable
FY 2026-27	~60% of total target	Significant pressure

The targets are back-loaded. This means that the pressure to reduce emissions increases significantly in the second year.

Trading and Banking

Feature	Rule
Trading Platform	Power Exchanges (IEX, PXIL)
Trading Frequency	Monthly
Banking	Unlimited
Borrowing	Not allowed

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The Penalty for Non-Compliance

The Environmental Compensation

If a unit fails to meet its target and does not purchase sufficient CCCs, the Central Pollution Control Board (CPCB) will impose an Environmental Compensation penalty.

Environmental Compensation = Shortfall (tonnes CO₂e) × Average Market Price × 2

The penalty is set at twice the average market price of CCCs during the compliance year.

Example Calculation

Variable	Assumption
Shortfall	100,000 tonnes CO₂e
Average carbon credit price	₹1,000 per tonne
Value of shortfall	₹10,00,00,000
Environmental Compensation (2×)	₹20,00,00,000 (₹20 crore)

The Financial Impact

For large refineries and petrochemical units, the potential penalty can run into hundreds of crores of rupees. This creates a powerful financial incentive to comply.

The Path to Penalty

Step	Description
1. Target missed	Unit does not meet its GEI target
2. Credit purchase required	Unit must buy CCCs to cover the shortfall
3. Failure to purchase	Unit does not buy sufficient CCCs
4. Penalty imposed	CPCB imposes Environmental Compensation
5. Payment required	Penalty must be paid within 90 days

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The Hydrogen Opportunity: Green Hydrogen Integration

Why Hydrogen Matters for Refineries

Petroleum refineries are major hydrogen consumers. Hydrogen is used in:

• Hydrocracking: Breaking down heavy oil fractions
• Hydrodesulphurisation: Removing sulphur from fuels
• Hydrotreating: Improving product quality

Currently, most refinery hydrogen is produced from natural gas through Steam Methane Reforming (SMR), which releases significant CO₂.

The Green Hydrogen Solution

Green hydrogen — produced through electrolysis using renewable electricity — can replace fossil fuel-based hydrogen in refinery operations.

The Benefits

Benefit	Description
Emissions reduction	Eliminates CO₂ from hydrogen production
CCTS compliance	Helps meet GEI targets
Carbon credits	Surplus reductions earn CCCs
Export competitiveness	Reduces CBAM exposure

The Petrochemical Opportunity

Green hydrogen can also be used in petrochemical production, particularly for:

• Ammonia production (for fertilizer)
• Methanol production
• Other chemical processes

The National Green Hydrogen Mission

India's National Green Hydrogen Mission targets 5 million tonnes per annum of green hydrogen production by 2030. Refineries and petrochemical plants will be key consumers of this green hydrogen.

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The Carbon Capture Opportunity

What Is Carbon Capture?

Carbon Capture, Utilisation and Storage (CCUS) involves capturing CO₂ emissions from industrial processes and either using them or storing them permanently underground.

Why CCUS Matters for Refineries

Refineries have concentrated CO₂ streams that are relatively easy to capture. CCUS can significantly reduce emissions from:

• Hydrogen production: CO₂ from SMR
• Process heaters: CO₂ from combustion
• Catalytic cracking: CO₂ from chemical reactions

The Financial Opportunity

Scenario	Outcome
CCUS reduces emissions	Helps meet GEI targets
Outperform target	Earns CCCs
Carbon credits sold	New revenue stream

The Government Support

The Union Budget 2026 announced a ₹20,000 crore outlay over five years for CCUS, targeted precisely at hard-to-abate sectors. Refineries and petrochemical plants are well-positioned to benefit from this support.

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The CBAM Connection: Export Competitiveness

What Is CBAM?

The Carbon Border Adjustment Mechanism (CBAM) is the EU's carbon tariff on imports. It came into effect on January 1, 2026.

The CBAM Impact on Refineries and Petrochemicals

CBAM covers hydrogen, which is a critical input for refineries and petrochemical production. While the direct impact on refineries and petrochemicals may be indirect, the broader implications are significant:

• Export products: Steel, aluminium, and cement exports are directly affected
• Input costs: Carbon costs on hydrogen and other inputs may increase
• Competitiveness: Indian products may face higher costs in EU markets

The CCTS Shield

A functioning national carbon market gives Indian producers a documented basis for demonstrating carbon costs already paid, which is directly relevant to CBAM exposure.

The EU-India FTA CBAM Annexure

The India-EU Free Trade Agreement includes a dedicated annexure on CBAM, with provisions to ease compliance for exporters. This includes engagement with EU authorities on taking into account the carbon price paid in India.

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What Oil & Gas Companies Must Do Now

Action 1: Confirm Your Coverage

Check whether your refineries or petrochemical units are among the 21 refineries and 11 petrochemical units covered.

Action: Review the notification and confirm which of your units are obligated.

Action 2: Calculate Your Baseline

Using your FY 2023-24 data, calculate your current emission intensity.

Emission Intensity = Total GHG Emissions (tCO₂e) / Total Output (units)

Action: Gather all emissions and production data for FY 2023-24.

Action 3: Understand Your Target

Each unit has been assigned a specific GEI target. You must understand what your target is and what reduction is required.

Action: Review your notified target. If unclear, seek expert guidance.

Action 4: Assess Your Compliance Gap

Calculate the difference between your current emission intensity and your target.

Gap = Current Intensity – Target Intensity

Action: Quantify your gap. If you have a surplus, you can earn CCCs. If you have a deficit, you need to reduce emissions or procure credits.

Action 5: Develop a Compliance Strategy

Strategy	Description
In-house reduction	Invest in efficiency, green hydrogen, CCUS
Credit procurement	Buy CCCs to cover the shortfall
Hybrid approach	Combine reduction and procurement

Action: Develop a strategy that minimises cost and maximises value.

Action 6: Register on the ICM Portal

All obligated entities must register on the Indian Carbon Market Portal.

Action: Complete registration if you have not already done so.

Action 7: File Form A

Form A must be filed by July 31, 2026.

Action: Prepare and submit Form A with all required documentation.

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Our Services

Service	What We Do
Compliance Assessment	Understand your obligations and assess your position
Baseline Calculation	Calculate your 2023-24 emission intensity
Target Interpretation	Understand your notified target
Gap Analysis	Assess your compliance position
Green Hydrogen Advisory	Evaluate green hydrogen opportunities
CCUS Advisory	Evaluate carbon capture opportunities
Credit Procurement	Help you buy CCCs at the best price
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 BEE
Sector Experience	Knowledge of refining and petrochemical operations
End-to-End Support	From assessment to compliance

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

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Conclusion: Prepare for Compliance

The petroleum refining and petrochemical sectors are at the forefront of India's carbon market transformation. With 21 refineries and 11 petrochemical units now covered by legally binding GEI targets, compliance is no longer optional.

Key Takeaways

Aspect	What You Need to Know
Notification Date	January 13, 2026
Refineries Covered	21
Petrochemical Units Covered	11
Baseline Year	FY 2023-24
Compliance Years	FY 2025-26 and FY 2026-27
First Deadline	July 31, 2026
Key Opportunity	Green hydrogen and CCUS

The Choice Is Yours

Option	Outcome
Act now	Prepare for compliance, explore green hydrogen and CCUS, earn CCCs
Wait and see	Face uncertainty, higher costs, potential penalties

📞 Ready to Prepare for Petroleum Refining and Petrochemical Compliance?

Book a free consultation with Siddharth Gupta, Advocate, Calcutta High Court.

• Understand your CCTS obligations
• Calculate your baseline emission intensity
• Develop a compliance strategy
• Explore green hydrogen and CCUS opportunities
• Procure CCCs if needed

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