India Sets CCTS Targets for the Iron and Steel Sector
India has brought its iron and steel sector into the compliance side of the Carbon Credit Trading Scheme (CCTS), setting greenhouse gas emission intensity targets for one of the country's largest industrial emitters. This is a significant step, because iron and steel is among the heaviest-emitting sectors in the scheme, and how it is treated shapes the character of the whole market.
What was announced
Iron and steel joins the other energy-intensive sectors already covered by the CCTS with legally binding emission intensity targets. The targets are set as emissions per unit of output (tonnes of CO2 equivalent per tonne of product) rather than as an absolute cap, consistent with the intensity-based, baseline-and-credit design of the CCTS. The baseline year is FY 2023-24, and the first compliance years are FY 2025-26 and FY 2026-27.
Firms that reduce their emission intensity below their target earn Carbon Credit Certificates (CCCs), which they can sell. Firms that fall short must buy and surrender CCCs to comply, or face an environmental compensation penalty.
Why the iron and steel sector matters
Iron and steel is one of the largest sources of emissions in the CCTS. The sector's baseline emissions are on the order of 349.5 million tonnes of CO2 equivalent in FY 2023-24, which makes it a heavyweight within the scheme and a major determinant of how much abatement and trading the market will see. The sector is also highly heterogeneous: integrated blast furnace and basic oxygen furnace plants have very different emission profiles from electric arc furnace operations and sponge iron producers, so targets are differentiated across sub-sectors rather than uniform.
A large share of the sector's emissions come from process chemistry that cannot be reduced by operational efficiency alone, which means fuel switching and electricity decarbonisation are the main compliance levers. That structural feature is part of why the sector's inclusion is closely watched.
What it means for the carbon market
Adding a sector this large expands the effective size of the market and the pool of potential buyers and sellers. Because the targets in the first phase are set on a gradual glide path, and because much of the near-term abatement in the sector sits in low or negative-cost territory, the early compliance years are expected to emphasise learning, MRV infrastructure, and gradual acclimatisation rather than sharp cost shocks. The stringency of future target cycles is what will determine how much real abatement the sector delivers over time.
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Frequently asked questions
Is India's iron and steel sector covered by the CCTS? Yes. Iron and steel is one of the energy-intensive sectors brought under the compliance mechanism of the Carbon Credit Trading Scheme, with emission intensity targets for the FY 2025-26 and FY 2026-27 compliance years.
What is the baseline year for the iron and steel targets? FY 2023-24 is the baseline year against which the emission intensity targets are set.
Are the CCTS iron and steel targets absolute caps? No. The CCTS is intensity-based, so targets are set per unit of output rather than as an absolute cap on total emissions.
How large are the iron and steel sector's emissions? The sector's baseline emissions are on the order of 349.5 million tonnes of CO2 equivalent in FY 2023-24, making it one of the largest sectors in the scheme.
What happens if a steel plant misses its target? It must buy and surrender Carbon Credit Certificates to cover the shortfall, or pay an environmental compensation penalty.