CCTS: UK CBAM Recognition of India’s Carbon Market
Why in the news
The United Kingdom has accepted India’s Carbon Credit Trading Scheme (CCTS) as a qualifying carbon price under its CBAM. Carbon costs paid in India can therefore be set off against the UK border levy on Indian exports.
Key facts
- Sectors likely to gain: steel, aluminium, cement and fertilisers exporters.
- UK CBAM: applies from 2027; the EU CBAM entered its definitive phase in 2026.
- CCTS notified: June 2023 by the Power Ministry, under the Energy Conservation (Amendment) Act, 2022.
- Administrator: Bureau of Energy Efficiency (BEE); policy is guided by the Indian Carbon Market’s National Steering Committee.
- Predecessor: Perform, Achieve and Trade (PAT), 2012; its certificates are being converted.
CBAM in brief
- A carbon border tax levied on emission-heavy imports. Covered goods: steel and iron, cement, aluminium, fertilisers and hydrogen, plus electricity in the EU.
- It aims to stop carbon leakage, meaning production moving to places with looser climate rules.
- Importers pay for the carbon embedded in goods, putting them on par with domestic products that already carry a carbon price.
Why recognition lowers the bill
- CBAM only charges for carbon not already priced in the country of origin.
- A carbon price paid at home is deducted from the border charge.
- Without recognition, Indian exporters would pay twice: under CCTS and again at the UK border.
How the CCTS works
| Feature | Compliance mechanism | Offset mechanism |
|---|---|---|
| Who takes part | Obligated entities in energy-intensive sectors such as aluminium, cement, chlor-alkali, pulp and paper, steel, fertiliser, petrochemicals, refineries, textiles | Non-obligated entities registering projects |
| How credits arise | Beat the greenhouse-gas emission-intensity target to earn Carbon Credit Certificates; shortfall entities must buy them | Projects follow approved methodologies and earn tradeable credits |
| Targets | First targets notified in 2025 | Not target-based |
Certificates are traded on power exchanges. The The registry is kept by the Grid Controller of India, while CERC (Central Electricity Regulatory Commission) oversees trading.
Significance
- Money that might have gone to European and British treasuries as border charges stays with India.
- It backs India’s 2070 net-zero goal and its NDC pledge for 2030: a 45% drop in GDP emission intensity, measured against 2005.
- Exporters need verified emissions data, the same kind the EU CBAM demands.
Exam angle
- Administrator: BEE; registry: Grid Controller of India; trading regulator: CERC.
- Two mechanisms: compliance and offset.
- CBAM purpose: prevent carbon leakage; EU phase 2026, UK 2027.
- Open question: how the EU will recognise the CCTS is still under negotiation.