Cement Manufacturers Association (CMA)

30 For the cement industry, this scheme converts emission intensity performance into a transparent financial variable for the first time at national-sector level, thereby shaping investment, technology choice, and operational efficiency.[2] This paper evaluates the design of the CCTS, its likely impact on the Indian cement sector, and its implications for the size and structure of the Indian carbon market, using publicly available data, numerical ranges, tables, and charts. The paper is structured as follows: Section 2 outlines the institutional architecture of the ICM and its historical relationship with the PAT scheme; Section 3 presents the sectoral coverage; Section 4 details cement-specific emission intensity targets; Sections 5 and 6 quantify sectoral CCC exposure and the projected carbon price trajectory; Section 7 assesses the financial burden on cement producers; Section 8 examines the broader benefits and constraints; Section 9 contextualises India's experience with the EU ETS and China's national ETS; and Section 10 concludes with policy implications. 2. Design and Institutional Architecture of the Indian Carbon Market 2.1 The CCTS and ICM Framework The CCTS is embedded in the Energy Conservation (Amendment) Act, 2022, and is implemented by the Bureau of Energy Efficiency (BEE) under the Ministry of Power.[1] The scheme combines two complementary mechanisms: • Compliance mechanism: GEI targets are assigned to obligated industrial units across eight notified sectors. Units that exceed their targets earn CCCs; those that fall short must purchase CCCs or face compliance penalties.[1,3] • Offset mechanism: Non-obligated entities (e.g., renewable energy developers and forestry projects) may register verified mitigation activities and issue CCCs for sale.[1] 2.2 Historical Linkage to the PAT Scheme Prior to the CCTS, India had implemented a market-based energy-efficiency mechanism called the Perform, Achieve and Trade (PAT) Scheme, a flagship programme under the National Mission for Enhanced Energy Efficiency (NMEEE), implemented by BEE.[4] PAT assigns Specific Energy Consumption (SEC) targets to Designated Consumers (DCs) over three-year cycles; over-achievers earn tradable Energy Saving Certificates (ESCerts) while under- achievers must purchase them.[5,6] The PAT scheme has been shown to reduce energy intensity by approximately 2.7% in the cement industry, with associated CO ₂ savings of roughly 22.5 million tonnes over 2005–2015.[7,8] The CCTS can be viewed as a GHG- focused successor to PAT — with analogous intensity- based logic but now directly tied to carbon- equivalent emissions and India's net-zero by 2070 pathway.[1,9] 3. Sectors Covered under the Indian Carbon Trading Scheme By 2026, the ICM has notified GEI targets for eight high-emission industrial sectors.[1,3,9] Table 1 presents the notified sectors and their status. Sector Status under CCTS / Indian Carbon Market (ICM) Cement GEI targets notified for FY 2025–26 and FY 2026–27; transitioning from PAT-style SEC logic [3,9]. Steel GEI targets notified; previously covered under PAT [1,9]. Aluminium GEI targets notified; previously covered under PAT [9]. Chlor-Alkali GEI targets notified; relatively small but highly energy-intensive sub-group [9]. Pulp & Paper GEI targets notified; previously under PAT [9]. Refineries GEI targets notified for FY 2025–26; previously under PAT [1,9]. Petrochemicals GEI targets notified for FY 2025–26; new sector entrant into ICM framework [1,9]. Textiles GEI targets notified for FY 2025–26; previously under PAT [1,9]. Table 1: Sectors Notified under India's Carbon Credit Trading Scheme / Indian Carbon Market (ICM) Broad sector coverage improves liquidity, price discovery, and efficient allocation of abatement effort across the economy.[1,9]