India carbon credit study: Paying to pollute may be cheaper than cutting emissions for steel and cement firms

A new study from Climate Risk Horizons finds that India's Carbon Credit Trading Scheme (CCTS) sets emission intensity reduction targets too low for major polluters like steel, cement, and aluminium. For top companies, the cost of buying carbon credits to offset shortfalls is less than 7% of annual profit, making it cheaper to pay fines than to invest in decarbonization. The study warns that the current penalty structure, set at twice the carbon credit price, is ineffective due to low initial prices and market volatility. Researchers recommend introducing a reserve floor price and stability reserves, and expanding the scheme to include the power sector, which is currently excluded. Without stronger financial incentives and independent regulation, the carbon market may fail to drive real emissions reductions.