Key Highlights
- India is transitioning from the Perform, Achieve and Trade (PAT) scheme to the Carbon Credit Trading Scheme (CCTS), shifting the focus from energy efficiency to greenhouse gas emission intensity.
- The proposed emission intensity targets for the steel sector are expected to accelerate decarbonisation, but long-term investments in low-carbon technologies will determine the scheme's success.
- The draft targets for iron and steel have undergone multiple revisions following extensive consultations between the government and industry stakeholders.
- Steel companies that outperform their assigned emission targets will be eligible to earn tradable carbon credits, while non-compliance will require them to purchase credits or face penalties.
- Experts believe the consultation phase is critical, as the final targets will directly influence the competitiveness of steel producers.
Introduction
India's steel industry is entering a new phase of environmental regulation with the proposed implementation of the Carbon Credit Trading Scheme (CCTS). Unlike the earlier Perform, Achieve and Trade (PAT) programme, which primarily rewarded improvements in energy efficiency, the new framework introduces greenhouse gas emission intensity as the key performance indicator. This transition reflects India's broader commitment to developing a domestic carbon market while supporting its long-term climate goals. For the steel industry, one of the country's largest carbon emitters, the scheme could redefine how companies compete, invest and grow over the next decade.
Why the Carbon Credit Trading Scheme Matters
The proposed emission intensity targets are designed to encourage steel producers to move beyond incremental efficiency improvements and adopt cleaner production technologies. Experts believe that while many companies may initially achieve compliance through operational improvements, future compliance cycles will require investments in advanced technologies such as hydrogen-based ironmaking, carbon capture, renewable energy integration and electrification. Since India remains the world's second-largest steel producer with significant capacity expansion planned, decisions taken today will influence the sector's carbon footprint for decades. The scheme therefore represents not only an environmental initiative but also a strategic industrial policy aimed at making Indian steel globally competitive in a low-carbon economy.
Market Analysis
One of the most significant aspects of the CCTS is that it introduces carbon efficiency as a measurable business parameter alongside production costs and operational performance. Companies capable of reducing emissions below their prescribed targets will generate tradable carbon credits, creating a new revenue opportunity while strengthening their ESG credentials. However, steel plants with older production technologies or higher carbon intensity may require substantial capital investments to remain competitive under the new framework. The scheme is therefore expected to encourage faster adoption of energy-efficient equipment, digital process optimisation and cleaner manufacturing technologies across the industry.
Industry Impact
Industry experts have highlighted that the draft targets are still under consultation, making this an important opportunity for steel producers to provide operational data and seek realistic benchmarks based on their manufacturing processes. Since the steel sector includes diverse production routes, including blast furnaces and DRI-EAF plants, assigning fair emission intensity targets remains one of the biggest regulatory challenges. Once the notification is finalised, the Bureau of Energy Efficiency will oversee monitoring and verification, making compliance a mandatory business requirement rather than a voluntary sustainability initiative. This evolution is expected to reshape investment priorities across India's steel sector as companies increasingly integrate carbon management into their long-term growth strategies.
Metalsbuy Market Pulse Insight
The Carbon Credit Trading Scheme has the potential to become one of the most significant structural reforms for India's steel industry in recent years. While the immediate focus will remain on achieving compliance, the larger impact will be on how companies allocate capital, modernise production facilities and prepare for increasingly carbon-conscious global markets. With international buyers, investors and regulators placing greater emphasis on low-carbon manufacturing, carbon competitiveness is gradually becoming as important as cost competitiveness. Steel producers that proactively invest in cleaner technologies today are likely to emerge as long-term beneficiaries as India's domestic carbon market continues to evolve.
Conclusion
India's transition to the Carbon Credit Trading Scheme marks a fundamental shift in the way industrial sustainability will be measured and rewarded. For the steel sector, the scheme creates both new opportunities and new responsibilities by linking environmental performance directly with financial outcomes. Although the final emission targets are still under consultation, the direction of policy is clear: future competitiveness will increasingly depend on carbon efficiency alongside production efficiency. Companies that begin preparing early through technology upgrades, process optimisation and strategic planning will be better positioned to thrive in India's emerging carbon economy.