In a landmark step for India’s climate action journey, the Ministry of Environment, Forest and Climate Change (MoEFCC) has notified the Greenhouse Gases Emission Intensity Target Rules, 2025 (GEI Target Rules), effective from October 8, 2025.[1] This pivotal move operationalizes the Indian Carbon Market, establishing the nation’s first legally binding emission reduction targets for carbon-heavy industries and transitioning them from voluntary commitments to a mandatory compliance regime.
The Rules are a critical part of India’s strategy to reduce economy-wide emissions and achieve its Nationally Determined Contributions (NDCs) under the Paris Agreement. They operationalize the Energy Conservation (Amendment) Act, 2022, which empowered the government to establish a domestic carbon market, and build upon the foundation of the Perform, Achieve and Trade (PAT) scheme by introducing direct carbon limits.
Who is Affected?
The GEI Target Rules initially apply to 282 industrial units across four carbon-intensive sectors. Major operators like Vedanta, Hindalco, and Nalco in the aluminium sector, and UltraTech, Dalmia, and JK Cement in the cement sector are part of this first compliance cycle. The covered sectors are Aluminium, Cement, Chlor-alkali and Pulp & Paper.
Key Features of the Rules:
The notification provides detailed, entity-specific GHG emission intensity targets (tonnes of CO2 equivalent per tonne of product) for the compliance years 2025-26 and 2026-27, benchmarked against a 2023-24 baseline. Obligated entities must achieve their specified emission intensity targets. The average reduction targets over two years against the baseline are approximately 5.8% for aluminium, 3.4% for cement, 7.5% for chlor-alkali, and 7.1% for pulp & paper. Facilities that outperform their targets will be issued tradable Carbon Credit Certificates. Conversely, entities that exceed their emission limits must purchase and surrender an equivalent number of certificates from the Indian carbon market to cover the shortfall.
The Rules introduce a strong deterrent for non-compliance. The Central Pollution Control Board (CPCB) is empowered to impose an “environmental compensation” on defaulting entities. This penalty is set at twice the average trading price of a Carbon Credit Certificate for that compliance year, with the average price to be determined by the Bureau of Energy Efficiency (BEE). The compensation must be paid within 90 days of the order.
Conclusion:
The notification of the GEI Target Rules is a critical development for India’s carbon market. It establishes a clear, legally enforceable framework that will drive decarbonization, encourage investment in green technologies, and support India’s climate goals. For businesses in the covered sectors, this marks a fundamental shift requiring immediate strategic attention to emission monitoring, reporting, and reduction strategies. The significant legal and financial implications of non-compliance make this a key focus area for corporate governance and risk management. This is a major development for India’s ESG landscape, and it will be interesting to see how these foundational rules shape the future of our domestic carbon market.
[1] ‘Greenhouse Gases Emission Intensity Target Rules, 2025’, MOEFCC Notification G.S.R. 739 (E) dated 08 October 2025