The Central Electricity Regulatory Commission (CERC) has issued the CERC (Terms and Conditions for Purchase and Sale of Carbon Credit Certificates) Regulations, 2026, proposing a framework for the purchase and sale of Carbon Credit Certificates (CCCs) under the Carbon Credit Trading Scheme (CCTS), 2023.

The objective of the regulations is to create a framework for the exchange of CCCs between obligated and non-obligated entities on power exchanges, or through such other mode as may be permitted by the Commission.

The regulations will apply to CCCs offered for transactions on power exchanges or through other modes permitted by the Commission pursuant to the CCTS and in accordance with the Power Market Regulations.

Unless otherwise specifically permitted by the Commission by order, CCCs will be dealt with only through power exchanges. The regulations provide for a compliance market for obligated entities and an offset market for non-obligated entities. The frequency of transactions is proposed to be monthly or at such periodicity as may be specified under procedures approved by the Commission.

Under the proposed institutional framework, the Grid Controller of India is designated to function as the Registry for the exchange of CCCs and is required to establish the framework for this purpose in accordance with the CCTS. The Bureau of Energy Efficiency (BEE) will act as the Administrator for CCCs issued under the Energy Conservation Act, 2001.

BEE must formulate a detailed procedure for transactions in CCCs, after public consultation and with the approval of the Commission, including provisions relating to interface activities between power exchanges, the registry and market participants, registration of obligated and non-obligated entities with the registry, and transfer and other matters relating to CCCs.

BEE will also monitor transparency in the exchange of CCCs and reporting instances of non-compliance to the Commission.

CCCs issued by BEE, after approval of the Central Government and credited in the registry upon fee payment, may be placed for dealing on power exchanges or any other mode permitted pursuant to the CCTS. Power exchanges or other permitted entities must obtain prior approval of the Commission for their rules, business rules and bye-laws relating to CCC trading, including eligibility criteria, the price discovery mechanism and processes governing interaction with the registry.

Entities intending to participate in CCC trading must register with the relevant power exchange or permitted entity. Following each dealing session, power exchanges are required to report transaction details to the registry, and upon successful transactions, registry accounts are to be updated by debiting the seller’s account and crediting the buyer’s account.

The regulations stipulate that an obligated or non-obligated entity will not place sale bids exceeding the total CCCs held in its registry account. The registry will cross-check cumulative sale bids across all power exchanges or permitted entities against available holdings. If cumulative bids exceed available CCCs, the bids will be treated as void and ineffective for price discovery purposes. Entities with more than three such defaults in a quarter will be barred from dealing in CCCs for the next six months, notwithstanding any penalty due under the Energy Conservation Act, 2001. The registry must publish a monthly list of such defaulting entities.

With regard to pricing, the denomination of one CCC will be as specified under the CCTS and will be equivalent to one tonne of carbon dioxide equivalent (tCO2e). The market price of CCCs will be discovered on the respective power exchange or permitted entity through processes approved by the Commission. Under the compliance mechanism, CCCs are to be traded within a floor price and forbearance price band, which will be approved by the Commission based on a proposal submitted by the BEE. The Commission may issue directions to the power exchanges, permitted entities or the registry if it is satisfied that there is an abnormal increase or decrease in prices, sudden volatility or sudden high or low dealing of CCCs.

Banking and surrender of CCCs will be governed by the detailed procedures for the compliance and offset mechanisms under the CCTS, as amended from time to time. The value and validity of CCCs will also be as specified under the CCTS and related detailed procedures. CERC, assisted by the BEE, will exercise market oversight over CCC trading on power exchanges or other permitted entities in accordance with the Power Market Regulations.

The regulations further provide that the Commission may relax provisions of the regulations by order, after giving an opportunity of hearing to affected parties, and may issue directions to address any difficulty in giving effect to the regulations.

In September last year, the Ministry of Environment, Forest, and Climate Change constituted the National Designated Authority to implement Article 6 of the Paris Agreement and establish mechanisms for carbon markets.

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