India's Carbon Market Grapples With Greenwashing Fears

Synopsis

On the basis of the Energy Conservation (Amendment) Act, India's Carbon Credit Trading Scheme has established legally binding emission-intensity targets for over 740 industrial units in nine sectors, such as cement, steel and textiles. However, a worldwide study revealed that only 16 per cent of carbon credits translate into real carbon reductions, while researchers in India have pointed to forestry-based credits as having a high risk of overclaiming. This article explores the maturing Indian carbon market and the doubts of its credibility in its development.

This is a Market Taking Shape

The India Carbon Credit Trading Scheme is based upon a legal framework provided by the Energy Conservation (Amendment) Act 2022 and is implemented on two pathways: the compliance pathway establishes binding emission intensity limits for large industrial emitters and the voluntary offset pathway certifies reductions taken in other parts of the economy. Consultancy EY says as of March 2026, greenhouse gas emission intensity targets have been notified in 9 sectors with over 740 obligated entities.

In March, the government organized an international carbon market conference (Prakriti 2026) and urged companies to consider carbon markets as an arena of innovation and investment, instead of merely a compliance exercise. Experts predict that by early 2026, the industry of carbon credits in India is worth around Rs 6 billion or $6 billion.

The Effectiveness Question

According to a widely cited study in Nature, merely 16 per cent of global carbon credits examined led to actual, extra emissions cuts, raising doubts about the integrity of voluntary carbon markets, which include projects coming from India.

Forestry based credits, in particular, have been a subject of concern from domestic commentators regarding the difficulty in validating long-term carbon sequestration and 'additionality' - the fact that a reduction would have occurred whether or not the credit-producing project was implemented.

Anjal Sharma, of the nonprofit ActionAid India, has said that carbon markets can be "vehicles" for greenwashing when carbon credits are traded to offset emissions instead of actually reducing them, especially when projects are not verifiable, transparent, need to be permanent and have no clear, independent climate benefit.

The voluntary carbon market is not designed to cut down on the emissions, it is designed to offset the emissions, says an analyst quoted in The Quint's investigation on carbon market.

Building Guardrails

With the compliance mechanism's credit issuance expected to start in the 2026-27 cycle, regulators are trying to tackle the issue of integrity. Monitoring, Reporting and Verification is being overseen by the Bureau of Energy Efficiency and a National Steering Committee for the Indian Carbon Market, while the Securities and Exchange Board of India published its framework for Business Responsibility and Sustainability Reporting, requiring third party assurance for the emissions disclosures of India's top 250 listed companies.

In March 2026, a new Government of India operated Indian Carbon Market Portal will be launched in order to enhance compliance and voluntary credit verification. The extent to which they can help restore confidence in a market that is still establishing its regulatory base will probably hinge on the intensity of the monitoring and verification process put in place once issuance of large volumes of credit is implemented.