India’s greenhouse gas emission intensity target sets stage for market-led decarbonisation, say experts, ET EnergyWorld

Mumbai: India’s Ministry of Environment, Forest and Climate Change recently came out with a draft notification setting greenhouse gas emission intensity (GEI) reduction targets for two years, beginning 2025-26, covering 282 obligated entities in various sectors such as aluminium and cement.

According to Dhanpal Jhaveri, CEO, Eversource Capital, the draft notification marks a significant inflection point in India’s climate policy landscape.

“By setting intensity-based emission reduction targets across 282 industrial entities, the government is not only raising the bar for accountability but also laying the groundwork for a more resilient, low-carbon economy,” he said.

Jhaveri added that this is India’s first sector-wide regulatory framework for decarbonisation — and it’s both pragmatic and progressive.

“It recognises the need to balance industrial growth with climate commitments, while introducing a clear market mechanism for carbon trading and enforceable penalties for non-compliance. These are precisely the signals long-term capital has been waiting for,” he said.

He further added that this would enable sustainable value creation, spur innovation, reallocate capital to efficient players, and drive a new competitiveness rooted in low-carbon advantage.

“We’re committed to supporting businesses that are forward-thinking, compliant, and climate-aligned. This is not just about meeting targets — it’s about building companies that are future-ready, both financially and environmentally,” Jhaveri added.

The notification was issued under the compliance mechanism of the Carbon Credit Trading Scheme, 2023. According to the draft, if these industries do not meet their GEI targets, they will have to purchase carbon credit certificates from the Indian carbon market.

In case an entity fails to comply with this, the Central Pollution Control Board will then impose a penalty for the shortfall.

According to Atanu Mukherjee, CEO, Dastur Energy, it is a positive and timely step towards accelerated industrial decarbonisation, and an important precursor to the creation of friction-free and functioning carbon markets.

He, however, added that an administered penalty-based scheme may not be the most economically or socially expedient approach to foster adoption of carbon pricing mechanisms.

“It may be more effective to use carbon markets for price discovery — identifying where mitigation is most cost-effective — and then apply that price not as a penalty, but as the basis for structured cash or credit incentives,” he said.

Mukherjee added that these incentives could be directed toward mandatory, trackable emission reduction investments by emitters, thereby combining the efficiency of markets with the directionality of policy.

• Published On Apr 24, 2025 at 06:05 PM IST

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