CERC notifies regulations for carbon credit certificate trading

The Central Electricity Regulatory Commission (CERC) has issued regulations establishing the framework for trading Carbon Credit Certificates (CCCs) on power exchanges. The regulations introduce floor and forbearance prices for CCC transactions and designate the Grid Controller of India Limited (GRID-INDIA) as the registry for exchange-based trades.

The Central Electricity Regulatory Commission (Terms and Conditions for Purchase and Sale of Carbon Credit Certificates) Regulations, 2026 were notified on February 27, 2026, and will come into force upon publication in the Official Gazette.

Regulatory framework and definitions

The regulations have been issued under the Electricity Act, 2003 and the Carbon Credit Trading Scheme (CCTS), 2023 notified by the Ministry of Power (MoP) in June and December 2023. They define Carbon Credit Certificates (CCCs) as tradable instruments representing one tonne of carbon dioxide equivalent (tCO2e) of greenhouse gas emission reduction, removal, or avoidance.

The Bureau of Energy Efficiency (BEE) has been designated as the Administrator of the scheme. GRID-INDIA will function as the Registry responsible for maintaining CCC accounts and recording transactions executed through power exchanges.

Market structure and trading mechanisms

The regulations establish two market segments under the CCTS. The Compliance Market will serve Obligated Entities that are required to meet emission intensity targets, while the Offset Market will enable participation by Non-Obligated Entities.

Unless permitted otherwise by the Commission, all CCC transactions will take place through power exchanges in accordance with the CERC (Power Market) Regulations, 2021. Trading sessions will be conducted monthly or at intervals approved by the Commission. Market participants are required to register with the relevant power exchange before participating in CCC trading.

Sellers are not allowed to place bids exceeding the CCCs available in their Registry accounts. GRID-INDIA will verify cumulative sale bids across all power exchanges against the certificates held by each participant.

Pricing and validity provisions

The regulations introduce floor and forbearance price mechanisms for CCC trading under the compliance mechanism. The final floor and forbearance prices will be approved by the Commission based on recommendations submitted by BEE.

The market price of CCCs will be discovered through exchange-based trading processes approved by CERC. The validity of CCCs will be determined in accordance with the Detailed Procedure for Compliance Mechanism and Detailed Procedure for Offset Mechanism issued under the CCTS.

BEE will categorize CCCs applicable to obligated and non-obligated entities, and the Commission may approve additional categories upon application.

Compliance and oversight mechanisms

The regulations include provisions to address defaults where entities attempt to sell CCCs exceeding the balance available in their Registry accounts. If an entity defaults three or more times within a quarter, it will face suspension from CCC trading for six months.

GRID-INDIA will publish a monthly list of defaulting entities. Power exchanges will submit transaction reports to the Registry after each trading session, enabling updates of CCC balances in buyer and seller accounts.

BEE will monitor the exchange of CCCs and report instances of non-compliance to the Commission.

Administrative and oversight functions

BEE will develop detailed procedures governing operational coordination between power exchanges, the Registry, and market participants. These procedures will cover registration processes, certificate transfer mechanisms, and dissemination of market information.

CERC, assisted by BEE, will exercise market oversight in accordance with the Power Market Regulations. The Commission may issue directions in cases of abnormal price movement, sudden volatility, or unusual trading volumes. The regulator also retains the authority to relax provisions of the regulations through a recorded order after providing an opportunity of hearing to affected parties.

The featured photograph is for representation only.