India’s Carbon Credit Trading Scheme (CCTS) reached ~490 obligated entities with the January 2026 notification tranche — on top of the entities already covered since October 2025. If you’re one of them, the mechanism is simpler to describe than most compliance regimes: beat your target, earn credits; miss it, pay for the gap one way or another.

The target

Each obligated entity is assigned a Greenhouse Gas Emission Intensity (GEI) target — tonnes of CO2-equivalent per unit of output, set at the sub-sector level against a fixed baseline year. It’s assigned automatically once you’re in a notified sector and cross BEE’s energy-consumption threshold — it doesn’t matter whether you export anything.

Two ways this resolves

You beat your target. The surplus is issued as Carbon Credit Certificates (CCCs), which you can hold or sell to entities that fell short.

You miss your target. You need to cover the shortfall — either by buying CCCs on the Indian Carbon Market, or by paying an environmental compensation penalty. That penalty is set at twice the average traded price of CCCs for that compliance year, under the Energy Conservation Act, 2001 (as amended by the Energy Conservation (Amendment) Act, 2022).

Why the 2× number is the whole design

A penalty set at exactly the market price wouldn’t discourage anything — you’d be indifferent between buying credits and paying the fine. Doubling it removes that indifference: buying CCCs to cover a shortfall is mathematically always cheaper than paying the penalty, so the only entities that end up paying it are the ones that didn’t act in time, not the ones that couldn’t find credits to buy.

What this means operationally

The number that actually matters isn’t the penalty rate — it’s knowing your projected GEI position early enough in the compliance year to buy credits at a normal price, instead of scrambling near the deadline. See the CCTS page for how CarbonComply tracks that position, or book a compliance assessment to check where you stand.