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Carbon Markets · India CCTSIndia’s Carbon Credit Certificate Market: How CCC Trading Works Under the CERC 2026 Regulations — and the Structural Questions That Remain
On 27 February 2026, the Central Electricity Regulatory Commission notified India’s first comprehensive regulations for the exchange-trading of Carbon Credit Certificates. Published in the Official Gazette on 3 March 2026, the CERC (Terms and Conditions for Purchase and Sale of Carbon Credit Certificates) Regulations, 2026 establish the full operational architecture for how CCCs will be bought and sold: three power exchanges, monthly trading sessions, a floor-and-forbearance price band, a registry run by Grid Controller of India, and three specific market integrity safeguards. Power Minister Shri Manohar Lal Khattar Ji has committed to a mid-2026 launch. The framework is, at last, complete enough to trade. But significant questions of market design — the specific price band values, the double-counting risk between RECs and CCCs, the structural oversupply threat from modest first-phase targets, and the registry testing timeline — remain unresolved. This article maps exactly how the market will operate, what participants must do before trading begins, and what the open questions mean for strategy.
The CERC CCC Regulations 2026 — notified 27 February, gazetted 3 March 2026 — establish three institutions as the operating spine of India’s carbon market: BEE as administrator, Grid Controller of India as registry, and CERC as market regulator. Trading is mandatory on power exchanges and barred over the counter. The three approved exchanges are IEX, PXIL and HPX. Monthly trading sessions are the default, adjustable by CERC. Settlement mirrors the existing short-term power market: T+1. CCCs are not classified as financial instruments in this initial phase, which affects how they are treated in corporate accounts and collateral frameworks.
The price band framework — a floor price and a forbearance price approved by CERC on proposal by BEE — is the most important feature of the market design that has not yet been resolved. The specific floor and forbearance values have not been notified as of April 2026. The floor determines whether the market delivers any credible carbon price signal or collapses toward zero as early REC markets did. The forbearance determines the maximum penalty exposure for deficit entities and effectively sets the upper bound on what strategic credit holders can extract. Analyst estimates for early-phase CCC prices range from Rs 600 to Rs 1,200 per tonne, but without a published floor, deficit entities cannot model their worst-case compliance cost with precision.
The two market segments — the Compliance Market for 740 obligated entities and the Offset Market for non-obligated voluntary participants — operate under distinct rules. The Compliance Market begins with CCCs generated from GEI over-performance against gazette-notified targets. The Offset Market begins with CCCs from eight government-approved methodologies: renewable energy (including hydro and pumped storage), green hydrogen via electrolysis, green hydrogen via biomass, industrial energy efficiency, landfill methane recovery, mangrove afforestation, renewable energy with storage, offshore wind, and compressed biogas. Projects must have started no earlier than 1 January 2025 to be eligible.
Banking of CCCs is unlimited — any surplus earned in FY 2025-26 can be held indefinitely for future compliance or sale. There is no vintage-based expiry in the current regulations, though IEEFA has recommended introducing one to prevent structural oversupply from accumulating into future years. Borrowing from future compliance years is not permitted. An entity holding banked CCCs from a good year has a genuine strategic option: sell now at early-market prices, or hold for later compliance years when targets will tighten and price pressure will increase. The optimal timing of this decision depends on the unknown trajectory of future CCTS targets and the trajectory of CCC prices — both of which have significant uncertainty.
The most significant unresolved design risk identified by practitioners is the double-counting potential between RECs and CCCs. A renewable energy generator could, in principle, claim RECs under the Renewable Purchase Obligation framework and CCCs under the CCTS Offset Mechanism for the same megawatt-hour of generation. The same unit of electricity could simultaneously qualify for I-RECs under the international standard. The CCC Regulations are entirely silent on this. BEE’s forthcoming Detailed Procedure for CCC transactions — which must be published and approved by CERC before trading begins — must resolve this, or the market will face credibility and double-counting challenges from day one.
The three institutions and what each actually does
The CERC CCC Regulations 2026 distribute market responsibility across three institutions. This division of labour is not arbitrary — it follows the logic of the existing power market architecture, where the same three-way split (administrator, registry, regulator) already operates for Renewable Energy Certificates. Each institution’s role in the carbon market is specific and non-overlapping.
One institutional feature worth noting is that CERC derives its authority over CCC trading from Section 66 of the Electricity Act 2003, which empowers CERC to promote the development of a market in power. The CCTS extended this mandate explicitly to carbon credits. This means CERC regulates the CCC market under the same legal framework as electricity markets — giving it access to the same enforcement powers, the same appellate structures through the Appellate Tribunal for Electricity (APTEL), and the same institutional familiarity with exchange-based trading that comes from twenty years of operating India’s short-term power market.
The mechanics of a CCC trade — how it actually works from bid to settlement
For an obligated entity or a voluntary project developer approaching the Indian Carbon Market for the first time, understanding the operational flow from holding a CCC to completing a trade is essential. The sequence is as follows.
Entities must register with GRID-INDIA’s ICM Registry and with at least one of the three power exchanges — IEX, PXIL or HPX. Registry registration establishes the entity’s CCC account; exchange registration establishes trading credentials. BEE’s forthcoming Detailed Procedure will specify the documents required, fee schedule and timeline for registration. Entities should begin this process as soon as BEE publishes the Detailed Procedure rather than waiting for the trading launch date — registration queues are likely to be significant in the months before launch.
After reviewing verified GHG emission reports, BEE calculates each obligated entity’s performance relative to its target. Entities that achieved GEI below their target receive a CCC issuance — one CCC per tCO₂e of over-performance, multiplied by production output. CCCs are credited to the entity’s ICM Registry account after Central Government approval. A cement plant that reduced GEI by 5% more than required on 2 million tonnes of output receives 2 million CCCs. These are now available to sell on the exchange or bank for future compliance.
CERC schedules monthly trading sessions on IEX, PXIL and HPX. An entity with surplus CCCs places a sell bid; a deficit entity places a buy bid. Price is discovered through the exchange’s bidding mechanism (auction-based, similar to the short-term electricity market), within the floor-to-forbearance band. An entity can choose any of the three exchanges. GRID-INDIA monitors cumulative sale bids across all three simultaneously — an entity cannot bid 10,000 CCCs on IEX and another 10,000 on PXIL if it only holds 10,000 in its registry account. Excess bids are voided.
Following the close of a trading session, the exchange reports transaction details to GRID-INDIA. The registry debits the seller’s CCC account and credits the buyer’s by the next business day (T+1). The CCC is now in the buyer’s account — it can be used for surrender to meet a compliance obligation, banked for future compliance, or placed for sale again in a subsequent session. The CCC is not a financial instrument — it does not generate interest, cannot be used as collateral in standard lending, and is not covered by SEBI’s securities framework. This has implications for how treasury teams account for it and how it can be used in pledged financing structures.
Entities that failed to meet their GEI target for FY 2025-26 must surrender CCCs equal to the shortfall. Surrender means the CCC is formally retired from the registry — it cannot be resold. An entity that surrenders CCCs purchased on the exchange has discharged its compliance obligation. An entity that has not surrendered sufficient CCCs by the deadline faces Environmental Compensation from CPCB at 2× the average CCC trading price during the compliance year’s trading cycle.
The price band — the most important unresolved question
The CERC regulations establish that CCCs in the compliance market will trade within a price band — a floor price below which no trade can occur and a forbearance price above which no trade can occur. Both limits are approved by CERC on proposal by BEE. As of April 2026, neither the floor nor the forbearance price has been published. This is the single most consequential unresolved element of the market design for the entities that will participate in it.
(minimum — BEE proposes, CERC approves)
(maximum)
(bidding within band)
Analyst range: Rs 600–1,200/t
Why the floor matters: If the floor is set too low — or if no floor is set initially — the market faces the same structural failure that plagued the EU ETS in its early years (prices near zero, no abatement incentive) and that devastated India’s ESCert market under PAT (50% of required certificates unpurchased, prices collapsed). A meaningful floor — analysts suggest Rs 150 to Rs 600 per tonne as a minimum — is the single most important design decision BEE and CERC will make before trading begins. Why the forbearance matters: The forbearance price is the effective ceiling on what deficit entities will pay. It is also the benchmark from which the Environmental Compensation penalty (2×) is calculated. If the forbearance is set too high, it provides a credible backstop against market manipulation but puts no upper limit on compliance cost during periods of credit scarcity. If it is set too low, it caps the abatement incentive for over-performing entities and limits the revenue from CCC sales.
The question of whether to set a floor at all — and where — reflects a fundamental design tension in any carbon market. A floor price provides a guaranteed revenue floor for abatement investments, making it easier for plant operators to justify capex on decarbonisation by giving a minimum value to the CCCs their investment will generate. It protects the market from price collapse during periods of credit oversupply, which is the most likely early-phase scenario given the modest ambition of the first-phase GEI targets. However, a floor price also means that the exchange price cannot fall below it even if all obligated entities are meeting their targets comfortably — which could create transfers from compliant entities to surplus holders at above-market rates.
IEEFA and the WEF have both published detailed analyses recommending that India incorporate a Price or Supply Adjustment Mechanism into the CCTS — a transparent, rule-based framework that adjusts credit supply when the market shows persistent imbalance. IEEFA’s specific recommendations include consignment auctions where the government releases reserve credits when prices rise excessively and withholds credits when prices fall toward the floor, vintage-based credit classification to prevent unlimited banking from flooding future markets, and a price corridor that pre-specifies intervention thresholds. None of these mechanisms have been incorporated into the current CCC Regulations — they remain recommendations awaiting adoption.
The two markets — compliance and offset, and how they interact
The CERC regulations establish two structurally distinct markets that will share the same exchange infrastructure.
The Compliance Market covers the 740 obligated entities across nine sectors whose GEI targets are gazette-notified. Their CCCs arise from over-performance: an entity whose GEI falls below its target earns CCCs from BEE proportional to the surplus reduction, multiplied by production. These CCCs flow into the registry and become available to sell to deficit entities in the same or other sectors. The compliance market is an intensity-based baseline-and-credit system — it does not have a cap on total emissions, only on emissions per unit of output, which means that production growth can increase absolute emissions even while all entities are technically complying with their targets. This is the design choice that allows CCTS to support India’s legitimate economic growth ambitions, but it is also the feature that limits the market’s effectiveness as an absolute emissions reduction tool.
The Offset Market opens the same CCC instrument to non-obligated entities — project developers who generate measurable, verifiable emissions reductions outside the nine industrial sectors. The eight government-approved methodologies (as of March 2025) cover renewable energy generation including hydro and pumped storage, green hydrogen production via electrolysis and via biomass, industrial energy efficiency in non-obligated units, landfill methane recovery, mangrove afforestation and reforestation, renewable energy paired with storage, offshore wind, and compressed biogas production. Projects must have a start date no earlier than 1 January 2025 to be eligible — preventing retrospective crediting of existing clean assets. Verified offset CCCs can be sold into the compliance market, providing deficit obligated entities with an alternative source of certificates and providing offset project developers with a monetisation route for their emission reductions.
| Feature | Compliance Market | Offset Market |
|---|---|---|
| Participants | 740 obligated entities across 9 sectors | Non-obligated entities — RE developers, forestry projects, green H₂ producers, etc. |
| How CCCs arise | Over-performance vs gazette GEI target — 1 CCC per tCO₂e below target × production | Verified emission reduction from 8 approved methodologies — 1 CCC per tCO₂e reduced |
| Price band | Floor and forbearance approved by CERC (values not yet published) | Market-discovered; price band regime not yet specified for offset CCCs |
| Can be used for compliance? | Yes — surrender to cover shortfall | Subject to BEE Detailed Procedure — expected yes, with possible limits |
| Banking | Unlimited — no expiry under current regulations | To be specified in BEE Detailed Procedure for Offset Mechanism |
| OTC trading | Barred — exchange only | Barred unless CERC specifically permits otherwise |
| Project start eligibility | N/A | No earlier than 1 January 2025 |
| Financial instrument status | Not a financial instrument in initial phase | Not a financial instrument in initial phase |
Three market integrity safeguards — and what they protect against
The CERC regulations include three specific safeguards designed to protect the CCC market from the integrity failures that have afflicted earlier Indian certificate markets.
First: the no-overselling rule. Entities cannot place sale bids on any exchange exceeding the total CCCs held in their ICM Registry account. GRID-INDIA enforces this cross-exchange: if an entity tries to bid 20,000 CCCs on IEX and simultaneously 20,000 on PXIL while holding only 20,000 in its registry, GRID-INDIA will notify both exchanges that the combined bid exceeds holdings, and the excess will be voided. This directly prevents the kind of phantom-credit selling that has undermined confidence in some voluntary markets globally — and it is enforced at the registry level, not just the individual exchange level.
Second: the default consequence. An entity that records more than three defaults — instances of attempted over-selling — in a single quarter is barred from dealing in CCCs for the following six months, without prejudice to any separate penalty under the Energy Conservation Act. This creates a meaningful deterrent: a large industrial entity that loses access to the CCC market for six months cannot sell surplus credits during that window, nor can it purchase credits to cover a compliance shortfall — creating both a revenue loss and a compliance risk simultaneously. This consequence is harsh enough to deter casual testing of the over-selling limit.
Third: CERC’s intervention power. CERC can issue directions to exchanges or the registry if it is satisfied that there is an abnormal increase or decrease in prices, sudden volatility, or sudden high or low dealing in CCCs. This reserve power mirrors CERC’s existing intervention capability in the short-term electricity market, where it has historically intervened during periods of extreme price volatility. The intervention mechanism is deliberately vague — “abnormal” and “sudden” are not defined — which gives CERC flexibility to respond to circumstances that cannot be anticipated in advance, but also creates uncertainty for market participants about where the intervention threshold lies.
Khaitan & Co’s 31 March 2026 analysis of the CCC Regulations identifies a double-counting risk that the regulations do not address. A renewable energy generator could simultaneously claim: (1) RECs under the domestic Renewable Purchase Obligation/Renewable Consumption Obligation framework, for the same megawatt-hour of generation; (2) CCCs under the CCTS Offset Mechanism, for the same emission reduction; and (3) I-RECs under the international standard, creating a potential third claim on the same unit. The CCC Regulations are entirely silent on this. BEE’s forthcoming Detailed Procedure for CCC transactions must specify clearly whether RECs and CCCs can coexist on the same unit of generation — and if not, how the exclusion will be enforced at the registry level. Until this is resolved, renewable energy generators face a structurally important choice that they cannot make with full information: register under the Offset Mechanism, maintain the REC route, or defer both pending the Detailed Procedure. The financial stakes are significant — RECs currently trade at approximately Rs 1,500 to 2,500 per MWh, while CCCs are expected at Rs 600 to 1,200 per tCO₂e — and the two instruments are priced on different bases (per MWh versus per tCO₂e), making a straightforward comparison difficult without entity-specific modelling.
The structural oversupply risk — learning from what went before
The most widely cited structural concern about India’s CCC market in its initial phase is oversupply. The first-phase CCTS targets require an average GEI reduction of approximately 3% across sectors — modest reductions, largely achievable through energy efficiency improvements that CEEW confirms sit in the negative-cost zone. CEEW analysis shows that the iron and steel sector’s abatement potential at low or negative cost — approximately 45 MtCO₂e — far exceeds the CCTS Phase 1 demand of 23 MtCO₂e. Similar patterns apply in cement and aluminium. The result is likely to be a surplus of CCCs relative to compliance demand in the first two years, putting downward pressure on prices.
This is not an unprecedented outcome. The EU Emissions Trading System generated a massive allowance surplus in its first phase (2005-2007) — prices collapsed to near zero — because initial targets were set too generously and there was no mechanism to absorb the surplus. Australia’s Safeguard Mechanism, introduced in 2016, required comprehensive reforms in 2023 because seven years of permissive targets had generated no meaningful price signal. Alberta’s TIER system accumulated over 53 million surplus credits by 2023, with market prices falling 40% below the official carbon price. India’s CCTS faces the same structural risk: first-phase targets that are achievable at near-zero cost may generate so many surplus CCCs that the market price collapses toward the floor — or, if no floor is set, toward zero.
The policy responses that have worked in other markets — Market Stability Reserves in the EU, consignment auctions in some Canadian provinces — involve withdrawing or releasing credits based on transparent, rule-based triggers tied to market conditions. IEEFA has recommended precisely such a Price or Supply Adjustment Mechanism for India’s CCTS. The CERC CCC Regulations as notified do not include one. CERC’s reserve intervention power is discretionary and untriggered-by-rules, which is different from the automatic, predictable PSAM design that has stabilised other markets. This is not a fatal flaw — the regulations can be amended — but it is the design gap that practitioners who are deciding whether to bank or sell surplus CCCs need to understand clearly.
For an obligated entity that expects to generate surplus CCCs in FY 2025-26, the banking-versus-selling decision depends on a set of variables that are currently unknowable: the specific floor price (which sets a minimum sell price), the forbearance price (which affects the ceiling on future demand), the pace at which CCTS targets tighten in Phase 2 (which determines whether CCCs will be scarcer or more plentiful in later years), and whether the double-counting exclusion will reduce the offset supply in ways that support prices. The case for selling early: early-market prices may be more favourable than prices in an oversupplied market; there is no certainty that banked CCCs will hold value if targets do not tighten significantly. The case for banking: unlimited banking allows surplus holders to wait for Phase 2 when targets tighten, prices rise, and early surplus becomes a strategic asset; if the floor is set at a meaningful level (Rs 300 or above), the downside of holding is limited. In practice, most sophisticated obligated entities will model multiple scenarios and construct a split approach — selling some proportion of surplus at market open and banking the remainder as insurance against future compliance shortfalls or for strategic sale when prices improve.
Frequently Asked Questions
Can ESCerts from the PAT scheme be traded or converted into CCCs?
No. Energy Saving Certificates under the PAT scheme are measured in tonnes of oil equivalent and are not convertible into CCCs, which are measured in tCO₂e. The two instruments are separate, non-fungible, and traded under different regulatory frameworks. Surplus ESCerts from PAT Cycle VIII or earlier can be traded on the existing PAT ESCert market on IEX or PXIL, but they cannot be used for CCTS CCC compliance obligations. There was early discussion in the CCTS design about a conversion pathway from ESCerts to offset CCCs, but no mechanism for this has been notified in either the CCC Regulations or the BEE Detailed Procedure.
What happens to an entity’s CCC account if it is acquired by another company?
The CCC Regulations do not yet specify how registry accounts are treated in corporate mergers, acquisitions, or demergers. The forthcoming BEE Detailed Procedure for CCC transactions is expected to address transfers of ownership, succession of compliance obligations, and the treatment of registry accounts in restructuring events. This is a material gap for transactions involving obligated entities — acquiring parties in M&A involving an obligated entity should factor the target’s CCTS compliance position (banked CCCs, compliance shortfall, and ACVA verification status) into due diligence, even in the absence of published guidance on account transfers.
Can a non-obligated entity participate in the compliance market?
The CERC regulations indicate that CCCs may be purchased by non-obligated entities — the regulations are designed for exchange between both obligated and non-obligated entities. This means a corporate buyer with net-zero commitments, an investment fund, or an intermediary trader could in principle purchase CCCs on the exchange. However, the specific eligibility criteria, registration requirements, and any restrictions on what non-obligated buyers can do with CCCs (whether they can retire them for voluntary claims or only resell them) will be specified in BEE’s Detailed Procedure. The legal status of CCCs as non-financial instruments also affects how entities structure purchases — they are not securities, so standard securities trading rules and know-your-customer frameworks may not directly apply.
When will the specific floor and forbearance price values be published?
As of April 2026, neither BEE’s proposed floor and forbearance prices nor CERC’s approvals of them have been published. These values are among the last key operational parameters to be finalised before trading can begin. Power Minister Shri Manohar Lal Khattar Ji’s mid-2026 target for market launch implies that BEE must submit its price proposal to CERC and CERC must approve it within the next two to three months. Obligated entities and project developers should monitor CERC’s official website and the Indian Carbon Market portal at indiancarbonmarket.gov.in for the publication of these values, as they will define the financial parameters of every compliance strategy and banking decision.
Will India’s CCC market eventually link with international carbon markets?
Linkage with international markets was discussed during the CCTS design phase and is referenced in ICAP documentation as a future aspiration. India has signalled interest in Article 6 of the Paris Agreement mechanisms — bilateral carbon credit agreements already exist with Japan (Joint Crediting Mechanism) and Singapore (bilateral carbon cooperation agreement). However, the domestic CCTS compliance CCCs are not currently designated for international transfer. The offset CCCs, particularly those from green hydrogen and renewable energy methodologies, are more likely to be the instrument through which India participates in international voluntary and Paris Agreement Article 6 mechanisms. GRID-INDIA’s registry was designed to be compatible with international registries, supporting eventual linkage. The timeline for any formal linkage depends on completing the domestic market architecture first — which remains the priority through 2026-27.