India notifies first emissions intensity targets for carbon-intensive sectors

The government has notified the Greenhouse Gas Emission Intensity Target Rules, 2025, setting India’s first legally binding emissions reduction target for carbon-heavy industries.

The notification issued by the Environment Ministry on October 8 after considering all suggestions and objections received on the draft rules published on April 16 requires 282 industrial units in the aluminium, cement, pulp and paper and chlor-alkali sectors to reduce greenhouse gas emissions per unit output (emission intensity) from baseline levels by 2023-24.

According to the notification, each facility will have to reduce the amount of greenhouse gases emitted per unit output (measured in tonnes of carbon dioxide equivalent per tonne of product) compared to the 2023-24 baseline. The compliance period begins in 2025-26 and continues through 2026-27.

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The move implements the Energy Conservation (Amendment) Act, 2022, which has empowered the government to set up a domestic carbon market.

It also builds on India’s Performance, Achievement and Trade (PAT) energy efficiency scheme, which previously set energy-saving targets for industries, but not direct carbon limits.

According to the rules, facilities that emit less than their target can earn tradable carbon credit certificates, while facilities that emit more than the target will have to buy equivalent credits from the Indian carbon market or pay a fine.

The fine, called “environmental compensation”, will be twice the average traded value of carbon credits during that compliance year.

The average price will be determined by the Bureau of Energy Efficiency (BEE). The Central Pollution Control Board (CPCB) will impose the fine and monitor its recovery, which will have to be paid within 90 days.

Company-wise and plant-wise targets are detailed in the notified programme.

For example, aluminum smelters operated by Vedanta, Hindalco, NALCO and BALCO and large cement plants owned by UltraTech, Dalmia, JK Cement, Shree Cement and ACC are included in the first compliance cycle.

Depending on the baseline year, emissions intensity reduction targets range from about 3.4% over two years in the cement sector to about 5.8% in aluminium, 7.5% in chlor-alkali and 7.1% in pulp and paper.

India’s carbon credit trading framework is considered critical to meeting its Nationally Determined Contribution (NDC) targets under the Paris Agreement, which include reducing emissions intensity of GDP by 45% from 2005 levels by 2030 and achieving net zero by 2070.

The rules also prepare Indian exporters to adapt to international mechanisms such as the EU’s Carbon Border Adjustment Mechanism (CBAM), which taxes carbon-intensive imports such as cement, steel and aluminium.