IEEFA Report: Key Factors Shaping Carbon Prices Under India's New Carbon Trading Scheme

A new report from the Institute for Energy Economics and Financial Analysis (IEEFA) breaks down the key variables that will determine carbon prices under India's upcoming carbon trading scheme. The report examines how factors like the cap trajectory, compliance flexibility, and the availability of offsets will influence price discovery in the market. India's scheme is expected to cover hard-to-abate sectors such as steel, cement, and chemicals, making price signals critical for driving industrial decarbonization. The IEEFA analysis highlights that the price floor and ceiling mechanisms built into the scheme will set initial boundaries, but actual trading will depend on how strictly the government enforces compliance and how many allowances it allocates. The report also notes that linking India's market with international carbon markets could add volatility or stability depending on design choices. For companies covered by the scheme, understanding these factors early will be key to managing compliance costs and planning abatement investments.