How does the compliance mechanism work?

Large emitters in selected sectors are designated obligated entities. Each gets a greenhouse gas emission intensity (GEI) target, written as tCO2e per unit of equivalent product, not as an absolute cap on total emissions. This means a plant can grow its output, but each tonne of product must be made with fewer emissions.

If an obligated entity does better than its target, it can be issued CCCs for the difference. If it falls short, it must cover the gap by surrendering CCCs, either banked from earlier years or bought in the market (BEE Detailed Procedure for Compliance Mechanism).

Which sectors and how many entities?

• October 2025: MoEFCC notified the first GEI targets for aluminium, cement, chlor-alkali, and pulp and paper, covering 282 obligated entities (PIB, 22 January 2026).
• 13 January 2026: a further notification added petroleum refineries, petrochemicals, textiles and secondary aluminium, covering 208 obligated entities, taking the total to 490 (PIB, 22 January 2026).
• Further sectors: BEE lists iron and steel and fertiliser among the sectors planned to move into the scheme, and has published a draft amendment for iron and steel (BEE, 2026).
• Thermal power plants have not been moved from the PAT scheme into the CCTS compliance mechanism (PIB, Ministry of Power, 4 December 2025).

How are targets set?

BEE's Detailed Procedure for the Compliance Mechanism explains the method:

• Targets follow a three-year trajectory with an annual target for each year (each year is a "compliance cycle").
• Each entity's emission intensity in a baseline year is calculated from verified data.
• The boundary is gate-to-gate and covers direct energy emissions, process emissions and indirect emissions from purchased electricity and heat.
• Grid electricity emissions use the CEA CO2 Baseline Database for the Indian power sector.
• Default emission factors apply in the first trajectory period, with actual factors later.

Illustrative example

The numbers below are invented to show the arithmetic only.

A cement plant has a target of 0.60 tCO2e per tonne of equivalent product for a compliance year. It produces 1,000,000 tonnes and achieves 0.58 tCO2e per tonne.

• Difference: 0.60 − 0.58 = 0.02 tCO2e per tonne
• CCCs it may be issued: 0.02 × 1,000,000 = 20,000 CCCs

If instead it achieved 0.62, it would have a shortfall of 0.02 × 1,000,000 = 20,000 tCO2e and would need to surrender 20,000 CCCs.

Banking

Unused CCCs at the end of a compliance cycle can be banked. Certificates an entity earned itself can be sold later or used for future compliance, while certificates it bought can only be used for compliance (BEE Detailed Procedure for Compliance Mechanism).