A policy analysis by the Institute for Energy Economics and Financial Analysis (IEEFA) highlights the importance of embedding price and supply adjustment mechanisms (PSAMs) from the start of India’s upcoming Carbon Credit Trading Scheme (CCTS). Set to begin compliance in 2026, the CCTS is designed as a baseline-and-credit system rewarding firms that outperform emissions benchmarks. However, the IEEFA warns that without proactive safeguards, early oversupply of credits could depress carbon prices and weaken investment signals for decarbonisation.
Drawing lessons from other markets such as the EU ETS, Canada, and Australia, the report recommends a rule-based framework incorporating consignment auctions, credit vintaging, and price corridors to maintain credibility and price stability. According to the institute, early adoption of these measures would position India’s carbon market as a global model of credible, equitable, and investment-ready climate governance.
Link:
https://ieefa.org/resources/strengthening-indias-carbon-market-case-stability-mechanism-indias-ccts
