The Government has notified the Greenhouse Gases Emission Intensity Target (Amendment) Rules, 2026. Published in the Gazette of India on 21 September 2026, the amendment revises specified entries relating to the Petroleum Refinery and Textile sectors under India's compliance carbon-market framework.
Why This Matters
India's climate policy is gradually moving beyond broad national targets towards measurable obligations for individual carbon-intensive industrial units.
Instead of requiring every industrial plant to reduce its total emissions by exactly the same percentage, the emerging framework uses Greenhouse Gas Emission Intensity (GEI) targets.
This approach links greenhouse-gas emissions with actual industrial output and creates a market incentive for firms that perform better than their notified targets.
The 2026 amendment is therefore important not merely for petroleum refineries and textile units. It is part of the larger operationalisation of the Indian Carbon Market (ICM).
What Exactly Has Changed?
The 2026 amendment further modifies the Greenhouse Gases Emission Intensity Target Rules, 2025.
Its principal purpose is to substitute specified entries in the Second Schedule relating to:
- Petroleum Refinery
- Textile
The Second Schedule contains entity-specific information such as:
- Name and registration number of the obligated entity
- Baseline equivalent product output
- Baseline greenhouse-gas emission intensity
- Notified GEI targets for compliance years
The 2026 notification does not create the Indian Carbon Market from scratch. It revises specific refinery and textile entries within an already existing compliance framework.
Evolution of India's Compliance Carbon Market
The current framework developed in stages.
Stage 1: Carbon Credit Trading Scheme, 2023
The Government notified the Carbon Credit Trading Scheme (CCTS), 2023 under the Energy Conservation Act, 2001.
The CCTS created the institutional framework for the Indian Carbon Market.
Stage 2: GEI Target Rules, 2025
In October 2025, Greenhouse Gas Emission Intensity targets were notified for four major carbon-intensive sectors:
- Aluminium
- Cement
- Chlor-Alkali
- Pulp and Paper
Stage 3: Expansion in January 2026
The compliance framework was expanded to additional industrial categories, including:
- Secondary Aluminium
- Petroleum Refineries
- Petrochemicals
- Textiles
This brought an additional 208 obligated entities under the compliance mechanism.
With this expansion, the Indian Carbon Market compliance framework covered 490 obligated entities across major emission-intensive industries.
Stage 4: September 2026 Amendment
The latest rules revise specified targets or entries for Petroleum Refinery and Textile obligated entities.
What is Greenhouse Gas Emission Intensity?
Greenhouse Gas Emission Intensity measures the quantity of greenhouse-gas emissions associated with producing a unit of output.
The compliance framework expresses targets broadly in terms of tonnes of CO₂ equivalent per unit of equivalent product.
Emission Intensity vs Absolute Emissions
This distinction is extremely important for UPSC.
| Absolute Emissions | Emission Intensity |
|---|---|
| Total greenhouse gases emitted by an entity or economy. | Emissions generated per unit of output. |
| Can rise if production increases. | Can fall even when total production increases. |
| Measures the overall emissions burden. | Measures carbon efficiency of production. |
A fall in emission intensity does not necessarily mean that total greenhouse-gas emissions have fallen.
If industrial output rises rapidly enough, absolute emissions may still increase even while emissions per unit of production decline.
Why Does India Use an Intensity-Based Approach?
India remains a developing economy with significant requirements for industrialisation, infrastructure, jobs and energy.
An intensity-based framework allows industrial output to grow while encouraging firms to reduce emissions associated with each unit of production.
This approach is consistent with the broader logic of India's climate commitments, which seek to reduce the emissions intensity of economic activity while preserving development space.
How Does the Compliance Mechanism Work?
Under the CCTS Compliance Mechanism, the Government identifies carbon-intensive industrial entities as Obligated Entities.
Each obligated entity receives a notified GEI target.
At the end of the relevant compliance period, actual verified performance is compared with the notified target.
If an Entity Performs Better than its Target
An obligated entity whose verified emission intensity is better than the notified target becomes eligible for Carbon Credit Certificates (CCCs) in accordance with the scheme.
If an Entity Fails to Meet its Target
An entity that does not achieve its required performance may need to obtain and surrender the required number of Carbon Credit Certificates for compliance under the applicable procedure.
Suppose two textile plants produce the same quantity of fabric.
Plant A uses cleaner electricity, efficient boilers and better heat recovery, so it emits fewer tonnes of CO₂-equivalent per tonne of product.
Plant B uses more energy and has a higher emission intensity.
The carbon-market framework creates an economic incentive for Plant B to improve efficiency or acquire carbon credits, while rewarding stronger performance by Plant A.
What is a Carbon Credit Certificate?
Under India's carbon-market architecture, each Carbon Credit Certificate represents one tonne of CO₂ equivalent of greenhouse-gas reduction or removal, subject to the rules and methodologies of the applicable mechanism.
These certificates form the tradable unit of the Indian Carbon Market.
Two Mechanisms under CCTS
The Carbon Credit Trading Scheme operates through two broad mechanisms.
1. Compliance Mechanism
This is the mandatory component for designated carbon-intensive industries.
Obligated entities must meet notified GEI targets.
2. Offset Mechanism
This mechanism allows eligible non-obligated entities to voluntarily undertake approved activities that reduce, avoid or remove greenhouse-gas emissions and seek Carbon Credit Certificates under specified methodologies.
Compliance mechanism and offset mechanism are not the same. The former places mandatory performance requirements on obligated entities; the latter provides a pathway for eligible voluntary mitigation activities.
Indian Carbon Market: Institutional Architecture
India's carbon market has a multi-institutional structure.
National Steering Committee for Indian Carbon Market
The National Steering Committee provides overall oversight and strategic direction.
It is chaired/co-chaired at Secretary level by the Ministry of Power and the Ministry of Environment, Forest and Climate Change.
Bureau of Energy Efficiency
The Bureau of Energy Efficiency (BEE) serves as the Administrator of the Indian Carbon Market.
Its functions include development of procedures, administration of the market framework and issuance-related responsibilities.
Grid Controller of India
The Grid Controller of India functions as the registry operator for the Indian Carbon Market.
It maintains entity accounts and records Carbon Credit Certificates and transactions.
Central Electricity Regulatory Commission
The Central Electricity Regulatory Commission (CERC) regulates trading activities associated with Carbon Credit Certificates.
Trading takes place through approved electronic power exchanges in accordance with the regulatory framework.
Accredited Carbon Verification Agencies
Independent verification is undertaken through Accredited Carbon Verification Agencies (ACVAs).
Their role is crucial because carbon markets depend on credible measurement of actual emissions and performance.
BEE → Administrator
Grid Controller of India → Registry
CERC → Trading Regulator
ACVA → Verification
What is MRV?
A credible carbon market requires a robust Monitoring, Reporting and Verification (MRV) system.
Monitoring
Industries measure fuel use, electricity consumption, industrial-process emissions and relevant production data.
Reporting
The information is reported using prescribed methodologies and formats.
Verification
Independent accredited agencies verify whether the reported emissions and performance are reliable.
The credibility of a carbon market depends less on the existence of tradable certificates and more on the integrity of the underlying MRV system. Poor measurement can create “paper reductions” without corresponding real-world climate benefits.
Scope 1 and Scope 2 Emissions
Obligated entities in sectors such as textiles are required to disclose relevant Scope 1 and Scope 2 emissions.
Scope 1
Direct greenhouse-gas emissions from sources owned or controlled by an organisation.
Examples:
- Fuel burned in industrial boilers
- Furnaces
- On-site generators
- Industrial-process emissions
Scope 2
Indirect emissions associated with purchased electricity, steam, heat or cooling consumed by the organisation.
Electricity consumed by a factory may create Scope 2 emissions for that factory even though the emissions physically occur at a separate power plant.
Why Petroleum Refineries Matter
Petroleum refining is energy intensive.
Refineries consume large quantities of heat, electricity and hydrogen and involve several processes that can generate greenhouse-gas emissions.
Potential decarbonisation options include:
- Energy-efficiency improvements
- Waste-heat recovery
- Low-carbon electricity
- Cleaner hydrogen
- Electrification of suitable processes
- Carbon Capture, Utilisation and Storage (CCUS)
- Process optimisation
Why the Textile Sector Matters
Textile production includes energy-intensive processes such as:
- Spinning
- Weaving
- Dyeing
- Drying
- Finishing
- Steam generation
Many units also operate within complex supply chains consisting of large companies as well as MSMEs.
This creates a dual challenge:
- Reducing industrial emissions
- Ensuring that compliance costs do not disproportionately burden smaller producers
Technology Options for Textile Decarbonisation
Important options include:
- High-efficiency boilers
- Renewable electricity
- Solar thermal systems
- Efficient motors
- Heat recovery
- Water and process optimisation
- Low-temperature dyeing technologies
- Material recycling and circular production
Carbon Pricing: Why Use a Market Mechanism?
Traditional environmental regulation usually tells industries what standards they must meet.
A carbon market adds an economic signal.
When emitting greenhouse gases carries a financial consequence and reducing emissions can generate tradable value, firms receive incentives to search for the least-cost mitigation options.
In theory, this can direct emission reductions towards entities that can achieve them most efficiently.
Compliance Carbon Market vs Carbon Tax
| Carbon Market | Carbon Tax |
|---|---|
| Creates tradable carbon units/certificates. | Government fixes a tax/price on emissions or carbon content. |
| Market helps determine certificate price. | Tax rate is administratively determined. |
| Trading creates flexibility between regulated entities. | No trading is necessary for the tax itself. |
Indian Carbon Market vs International Carbon Markets
India's domestic carbon market should also be distinguished from international cooperation under Article 6 of the Paris Agreement.
The CCTS primarily creates a domestic institutional framework.
Article 6, by contrast, deals with international cooperation and transfer/accounting of mitigation outcomes under specified Paris Agreement mechanisms.
Carbon Credit Trading Scheme 2023 and Article 6 of the Paris Agreement are related to carbon markets, but they are not identical mechanisms.
CCTS and the PAT Scheme
India already had experience with market-based energy-efficiency regulation through the Perform, Achieve and Trade (PAT) scheme.
PAT focused largely on improving energy efficiency through specific energy-consumption targets and trading of Energy Saving Certificates.
The CCTS compliance mechanism marks a shift towards explicit greenhouse-gas emission-intensity regulation.
Several industrial sectors that were previously covered under PAT have transitioned into the CCTS compliance mechanism.
PAT → Energy Saving Certificates (ESCerts)
CCTS → Carbon Credit Certificates (CCCs)
Why India Needs an Industrial Carbon Market
1. Industrial Decarbonisation
Sectors such as cement, aluminium, refineries, chemicals and textiles are difficult to decarbonise through renewable electricity alone.
A market signal can encourage efficiency, fuel switching, process innovation and new technologies.
2. Technology Adoption
Industries that expect carbon reductions to have monetary value may have stronger incentives to invest in:
- Energy efficiency
- Electrification
- Green hydrogen
- Waste heat recovery
- Renewable energy
- CCUS
3. Export Competitiveness
Global supply chains are increasingly tracking product-level carbon footprints.
Indian companies able to demonstrate lower-carbon production may gain advantages in markets where buyers and regulators increasingly demand emissions information.
4. Climate Finance
A credible carbon market can potentially channel finance towards lower-carbon technologies and efficiency improvements.
5. Data Infrastructure
Mandatory carbon accounting can improve India's industrial emissions database.
Good emissions data are themselves an important governance asset for climate policy.
Major Challenges
1. Accurate Baselines
Targets become unreliable if baseline emissions or production figures are inaccurate.
2. MRV Capacity
Carbon accounting requires trained professionals, consistent methodologies and credible third-party verification.
3. Risk of Weak Targets
If targets are too easy, industries may receive credits without undertaking meaningful technological transformation.
4. Risk of Excessive Compliance Costs
Targets that are too stringent without adequate technological options may increase costs, particularly in internationally competitive sectors.
5. Carbon Price Volatility
Very low carbon prices may provide little incentive for investment, while excessive volatility can make long-term planning difficult.
6. MSME Linkages
Large obligated entities often depend on supply chains containing thousands of smaller businesses.
Climate compliance may indirectly affect MSMEs even where they are not themselves obligated entities.
7. Greenwashing Risk
A market that issues certificates without genuinely additional and verifiable emission reductions can undermine public trust.
Emission Intensity and India's Net-Zero Goal
India has announced a long-term objective of achieving net-zero emissions by 2070.
Reaching net zero will require transformation across:
- Power
- Industry
- Transport
- Buildings
- Agriculture
- Land use
Industrial carbon markets are therefore one instrument within a much wider climate-policy portfolio.
They cannot substitute for renewable-energy expansion, green hydrogen, efficiency standards, public investment, R&D and sector-specific regulation.
Way Forward
Strengthen MRV
India should maintain rigorous common methodologies, digital reporting and credible independent verification.
Set Ambitious but Realistic Targets
GEI trajectories should encourage genuine technological change while recognising sector-specific constraints.
Improve Market Liquidity
A functional carbon market requires sufficient buyers, sellers and transparent price discovery.
Protect Competitiveness
Decarbonisation policy should be accompanied by technology support, concessional finance and infrastructure for green power and clean fuels.
Support MSMEs
Smaller firms in supply chains need energy audits, technology assistance and affordable green finance.
Prevent Double Counting
A robust registry and accounting framework should ensure that the same emission reduction is not claimed multiple times.
Link Markets with Real Technology Change
The ultimate purpose of carbon pricing should not be trading certificates for its own sake.
It should accelerate investment in cleaner industrial processes.
Conclusion
The Greenhouse Gases Emission Intensity Target Amendment Rules, 2026 represent another step in the operationalisation of India's domestic carbon market.
By refining entity-specific obligations for petroleum refineries and textile units, the Government is moving towards a system in which industrial greenhouse-gas performance becomes measurable, verifiable and economically consequential.
However, the success of the Indian Carbon Market will depend less on the number of certificates traded and more on whether the system produces real, additional and verifiable reductions in the carbon intensity of Indian industry.
India's challenge is therefore to design a carbon market that simultaneously supports industrial growth, international competitiveness and deep decarbonisation.
- CCTS was notified in 2023.
- It is linked to the Energy Conservation Act, 2001.
- GEI Target Rules operate under the Environment (Protection) Act, 1986 framework.
- GEI means greenhouse-gas emissions per unit of equivalent product output.
- Emission intensity is different from absolute emissions.
- 2026 amendment revises specified Petroleum Refinery and Textile entries.
- 490 obligated entities were covered after the January 2026 expansion.
- CCTS has Compliance and Offset mechanisms.
- BEE is the Administrator of the Indian Carbon Market.
- Grid Controller of India is the Registry operator.
- CERC regulates Carbon Credit Certificate trading.
- Accredited Carbon Verification Agencies verify emissions/performance.
- CCC stands for Carbon Credit Certificate.
- One CCC represents one tonne of CO₂-equivalent under the market framework.
- Scope 1 means direct emissions.
- Scope 2 includes indirect emissions from purchased electricity, heat, steam or cooling.
- PAT uses Energy Saving Certificates; CCTS uses Carbon Credit Certificates.
Mains Practice Questions
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e-Gazette of India – Greenhouse Gases Emission Intensity Target Amendment Rules 2026
Gazette ID: CG-DL-E-21092026-276352
- Ministry of Environment – GEI Targets for Additional Carbon-Intensive Industries
- Ministry of Power – Carbon Credit Trading Scheme & Indian Carbon Market
- Bureau of Energy Efficiency – Indian Carbon Market Framework
- Ministry of Textiles – Textile Sector under Indian Carbon Market
- MoEFCC – Earlier GEI Target Amendment Notification for Refineries, Petrochemicals, Textiles & Secondary Aluminium
