The Legal and Regulatory Framework for the Indian Carbon Market Scheme

The key aspects of the legal and regulatory framework governing the Indian Carbon Market Scheme.

The global climate crisis has pushed nations to take action against rising carbon emissions and adopt sustainable practices. In this regard, India, as one of the world’s largest carbon emitters, has recognized the importance of addressing climate change through innovative mechanisms. 

One such initiative is the Indian Carbon Market Scheme, which aims to create a platform for trading carbon credits and incentivize emissions reductions. To ensure the success and integrity of this scheme, a robust legal and regulatory framework has been established. 

Climate Change Laws and Policies

India has enacted various laws and policies to address climate change and promote sustainable development. The central legislation governing climate change is the Environment (Protection) Act, of 1986. This act empowers the government to take necessary measures to protect and improve the environment, including measures to control air pollution and greenhouse gas emissions.

Furthermore, India has ratified the United Nations Framework Convention on Climate Change (UNFCCC) and the Paris Agreement. These international agreements provide a broader framework for countries to combat climate change and reduce greenhouse gas emissions. India’s commitment to these agreements reflects its dedication to the global effort of mitigating climate change.

Carbon Market Regulatory Authority

The Central Electricity Regulatory Commission (CERC) will function as the governing authority overseeing all trade operations within the carbon market in India. Its primary role will be to guarantee adherence to regulations, supervise trading activities, and implement measures to uphold the integrity of the market.

Grid-India, on the other hand, will assume the responsibility of serving as the official registry for the carbon market. It will be responsible for maintaining comprehensive records of carbon credits, transactions, and participant details. By doing so, Grid-India will promote transparency and accountability within the market.

Carbon Credit Generation and Trading

The Indian Carbon Market Scheme allows eligible entities to generate and trade carbon credits. The process begins with the identification of projects that contribute to emissions reductions or removals. These projects can include renewable energy installations, energy efficiency improvements, afforestation, and more. 

The carbon credits can then be traded on the market, providing financial incentives for entities to reduce their emissions. The trading of carbon credits follows a transparent and standardized process, ensuring fair pricing and efficient market operations. 

Offsets and Compliance

The Indian Carbon Market Scheme allows entities with compliance obligations, such as large industrial emitters, to meet their emissions targets by purchasing carbon credits from projects that have exceeded their emission reduction goals. These purchased credits, known as offsets, can be used to offset a portion of the entity’s own emissions. This mechanism encourages collaboration between different sectors and provides flexibility in achieving emissions reductions.


The Indian Carbon Market Scheme represents a significant step towards addressing climate change and promoting sustainable practices in India. The legal and regulatory framework governing the scheme provides the necessary guidelines and oversight to ensure its effectiveness and integrity. 

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Mousona Poddar

A passionate Content Writer who helps to scale your business by words with excellent research skills.

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