Missing piece: Thermal power & key market parameters
One of the most significant gaps in the current design of CCTS is the exclusion of the thermal power sector from its initial phases. Globally, the power sector has the highest carbon pricing coverage, reflecting its central role in national emissions profiles.
In India, thermal power accounts for nearly 40 per cent of total GHG emissions, yet the initial phases of the CCTS will cover only about 10 per cent of national emissions. This significantly limits the scheme’s ability to influence economy-wide decarbonisation. Without the inclusion of the largest emitter, the carbon market risks having only a marginal climate impact.
CSE argued that strengthening CCTS requires a set of clear policy choices. These include setting ambitious benchmarks followed by a credible carbon price, introducing a robust and well-funded market stability mechanism, gradually integrating the thermal power sector and establishing a revenue-generation mechanism.
Such revenue could be used to support micro, small and medium enterprises, which often lack access to capital for decarbonisation. Equally important are strong provisions for data integrity through a robust MRV system and greater awareness among stakeholders, including public disclosure of emissions data, random inspections, and strict limits on the use of offset credits. The system should also begin transitioning towards a more credible and effective carbon market.
Why choices made now matter
In mature markets such as the European Union, carbon prices have reached levels that influence investment decisions and accelerate the adoption of clean technologies. India’s carbon market has the potential to play a similar role, but only if it is designed with ambition and integrity.
An article on Down To Earth mentioned that India notified greenhouse gas emission-intensity targets for only four industrial sectors after a significant delay, diluting ambition and reducing potential emission reductions under the CCTS.
It noted that while nine sectors are envisaged under the scheme, currently India has notified targets for just four sectors, but key sectors like petrochemicals and steel are still awaiting notifications. This staggered and delayed rollout risks oversupply of credits and weakens the credibility of the market.
For now, India’s carbon market remains in its warming-up phase. Without tighter targets, wider sectoral coverage and stronger enforcement, the CCTS risks repeating the limitations of earlier market-based schemes, high participation, low impact.
Whether it becomes a meaningful climate instrument or another compliance mechanism will depend on whether India is willing to match global scale with domestic ambition.