JSA Prism | Electricity and Power

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Central Electricity Regulatory Commission notifies regulations governing purchase and sale of Carbon Credit Certificates

The Central Electricity Regulatory Commission (“CERC”), on February 27, 2026, has notified the CERC (Terms and Conditions for Purchase and Sale of Carbon Credit Certificates (“CCCs”)) Regulations, 2026 (“CCC Regulations, 2026”) in furtherance of the Carbon Credit Trading Scheme, 2023 (“CCTS”). The CCC Regulations, 2026 establish the regulatory framework governing the trading of CCCs between ‘Obligated Entities’ and ‘Non-Obligated Entities’ through ‘Power Exchanges’ or such other modes as may be permitted by CERC. The framework operationalises exchange-based carbon credit trading in India by prescribing rules relating to institutional responsibilities, trading mechanisms, pricing safeguards and market oversight. This aligns with the Electricity Act, 2003, the Energy Conservation Act, 2001 and the Environment Protection Act, 1986.

Salient features

Objective and scope of the regulatory framework:The CCC Regulations, 2026 establish a framework for the exchange of CCCs between ‘Obligated Entities’ and ‘Non-Obligated Entities’ under the CCTS. It applies to CCCs offered for transactions on ‘Power Exchanges’ or through such other modes as may be permitted by CERC. Such transactions must be conducted in accordance with the CCTS and the CERC (Power Market) Regulations, 2021 (“Power Market Regulations”).
Institutional architecture for the carbon market:The CCC Regulations, 2026 designate the Bureau of Energy Efficiency(“BEE”) as the ‘Administrator’ responsible for developing detailed procedures for CCC transactions. It also includes registering market participants, disseminating market information and monitoring compliance with the regulatory framework. The Grid Controller of India Limited (“GRID-INDIA”) is designated as the ‘Registry’, responsible for maintaining electronic accounts of CCC holdings, verifying transactions executed through ‘Power Exchanges’ and recording the transfer of certificates between buyers and sellers.
Value, validity and categorisation of CCCs:The value and validity of CCCs are determined in accordance with the provisions of the CCTS and the detailed procedures issued under the compliance and offset mechanisms of the CCTS. CCCs are to be categorised by BEE for ‘Obligated Entities’ and ‘Non-Obligated Entities’. CERC may permit the introduction of additional categories of certificates consistent with the Power Market Regulations.
Market structure for CCC trading:The CCC Regulations, 2026 establish 2 (two) distinct market segments for CCC transactions, as mentioned below:
- the ‘Compliance Market’ is intended for‘Obligated Entities’, operating in sectors such as aluminium, cement, chlor-alkali, pulp and paper, petroleum refineries, petrochemicals, textiles and secondary aluminium, to meet regulatory requirements relating to emission intensity targets; and
- the ‘Offset Market’ enables ‘Non-Obligated Entities’ to participate voluntarily in carbon credit trading. Unless otherwise permitted by CERC, CCC transactions are required to take place through ‘Power Exchanges’. The trading sessions will be conducted on a monthly basis or at such other periodicity as may be approved by the CERC.
Trading procedures and safeguards against default:Entities intending to participate in CCC trading must register with the relevant ‘Power Exchange’. Market participants are prohibited from placing sale bids exceeding the CCCs available in their ‘Registry’ The ‘Registry’is required to verify cumulative sale bids across ‘Power Exchanges’ and declare excess bids void. Entities that default more than 3 (three) times within a quarter by attempting to sell CCCs beyond their holdings may be barred from trading for a period of 6 (six) months. The ‘Registry’ must publish the list of such defaulters.
Pricing framework and market stability mechanisms:Each CCC represents the reduction, removal or avoidance of 1 (one) tonne of carbon dioxide equivalent. The market price of CCCs must be discovered through exchange-based trading processes approved by CERC. Under the compliance mechanism, CCC trading must occur within a floor priceandforbearance price band proposed by BEE and approved by CERC. The Central or State commission retains the power to issue directions where abnormal price movements, sudden volatility or unusual trading volumes are observed in the market.
Regulatory oversight and operational provisions:The CCC Regulations, 2026 provide for banking and surrender of CCCs in accordance with the detailed procedures issued under the CCTS. CERC, assisted by BEE, will exercise market oversight over CCC trading on ‘Power Exchanges’ in accordance with the Power Market Regulations. CERC also retains powers to determine fees payable to the Registry, issue directions to address implementation challenges, and relax provisions of the regulations where necessary to facilitate the development of the carbon credit market.

Conclusion

The CCC Regulations, 2026 provide the operational framework for exchange-based trading of carbon credits in India and mark a key step in the implementation of the CCTS. By defining the institutional roles of BEE and the ‘Registry’, establishing compliance and offset market segments, and introducing exchange-based price discovery with regulatory safeguards, the CCC Regulations, 2026. They also seek to create a transparent and structured market architecture for CCC transactions.

Looking ahead, the effectiveness of the framework will depend on the detailed procedures to be issued by BEE, the operational readiness of the ‘Registry’ and ‘Power Exchanges’, and the level of participation from ‘Obligated Entities’ as well as voluntary market participants. As India gradually operationalises its domestic carbon market, these regulations may also influence investment and compliance strategies for industries subject to emission intensity targets and entities seeking to participate in voluntary carbon markets. The evolution of pricing mechanisms, market liquidity and regulatory oversight will therefore be the key to determining how effectively India’s emerging carbon market develops in the coming years.

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