Central Electricity Regulatory Commission (Terms and Conditions for Purchase and Sale of Carbon Credit Certificates) Regulations, 2026

What it does

India's carbon market has three layers, and these regulations are the one that governs the trade. The Energy Conservation Act, 2001, as amended in 2022, lets the Central Government specify a carbon credit trading scheme. The Ministry of Power notified that scheme in 2023, and the Bureau of Energy Efficiency administers it. Targets for named industrial plants come from a separate set of rules under the Environment (Protection) Act, 1986. These regulations, made by the Central Electricity Regulatory Commission and dated 27 February 2026, say how the certificates that settle those targets may change hands.

They confine dealing in certificates to a power exchange, unless the Commission permits another mode by order. They provide for two segments: a compliance market for the entities that carry a target, and an offset market for everyone else. Trading is monthly unless the Commission approves another interval. The Grid Controller of India acts as the registry.

Who it binds

Buyers and sellers of certificates: the obligated entities that must surrender certificates against a shortfall, the entities that earn certificates by beating a target, and the registered projects that earn them in the offset segment. It also binds the power exchanges that list the product, and the registry. A plant with a target is the usual buyer. A plant that has beaten its target, or an offset project, is the usual seller.

What has changed, and when

The regulations are new, and are dated 27 February 2026, in the Gazette of India Extraordinary, Part III, Section 4. They sit on a scheme that is itself recent: the Carbon Credit Trading Scheme, 2023, an amendment of December 2023 that added the offset mechanism, and the emission intensity target rules of October 2025, amended in January 2026 to add further plants. Each of these has its own commencement, and a view on any one of them should be taken from the text of that instrument.

What turns on it in practice

The regulations matter to a plant at the moment it has a shortfall. The site's note on carbon credit targets and the shortfall explains why. A plant that misses its intensity target must buy and surrender certificates for the gap, and one certificate is one tonne of carbon dioxide equivalent, a point the regulations confirm by reference to the scheme. If the plant does not cover the gap, it is liable to environmental compensation set at twice the average price at which certificates traded in the relevant cycle. The price of the certificate therefore decides the price of default, and the price is discovered on the exchange these regulations create.

Three features shape how a plant should plan. First, prices under the compliance mechanism move between a floor and a forbearance price, both approved by the Commission on a proposal from the Bureau. Second, certificates a plant was issued may be carried forward and either sold or used later, while certificates it bought may be carried forward only for compliance and not resold. Third, an entity with more than three cases of over-selling in a quarter is barred from dealing for six months, which is a risk for a trader and a reason for a plant to reconcile its holdings before it offers certificates for sale.

Several points remain open on the text. The floor and forbearance prices are left to a later approval of the Commission. Neither the regulations nor the target rules say what happens to the compensation benchmark if a year's cycle produces thin trading or none. A project agreement, a power purchase agreement or a supply contract that allocates carbon cost between the parties should say which party bears a price that cannot be found.

For a developer of an industrial or renewable project, the drafting of certificate ownership, the treatment of avoided emissions claimed by both generator and consumer, and the allocation of shortfall cost belong in the contract, because the regulations deal with the market and not with the bargain between two parties.