A student report from Sciences Po examines how India's move from the Perform, Achieve and Trade (PAT) scheme to the Carbon Credit Trading Scheme (CCTS) affects industrial energy efficiency. The study finds that emissions trading systems do not automatically boost efficiency gains; outcomes depend on policy design, market conditions, and institutional capacity. The report highlights both opportunities and risks under the CCTS. Stronger market incentives could drive more investment in energy efficiency, but more compliance options might dilute the focus on actual efficiency improvements. The authors recommend measures like consignment auctions for market stability, stronger MRV support, and targeted financial incentives to ensure the new system reinforces industrial decarbonization. This analysis carries broader relevance as the EU's Carbon Border Adjustment Mechanism pushes emerging economies to develop domestic carbon markets. The paper offers five specific policy recommendations to prevent the CCTS from weakening incentives for cost-effective industrial energy efficiency gains.
