India must assess emissions targets through economy-wide lens

Source: The post India must assess emissions targets through economy-wide lens has been created, based on the article “Assessing India’s carbon credit trading scheme targets” published in “The Hindu” on 14th July 2025

UPSC Syllabus Topic: GS Paper1- Environment pollution and degradation

Context:India has announced emissions intensity reduction targets for eight major industrial sectors under its Carbon Credit Trading Scheme (CCTS). The key debate is whether these targets are ambitious. Experts argue that the assessment must focus on economy-wide outcomes, rather than sectoral or entity-level comparisons.

For detailed information on Carbon credit trading scheme: Waiting to exhale read this article here

Need for an Economy-Wide Lens

1. Shortcomings of Entity-Level Evaluation: The article stresses that assessing ambition at the entity or sector level is misleading. Carbon markets function through aggregate reductions, not individual efforts. Emission trading allows entities to meet targets collectively, making overall reduction the correct measure of ambition.
2. Lessons from the PAT Scheme: India’s PAT scheme demonstrated that while some sectors improved energy intensity, others regressed. Yet, collectively, energy used per economic output declined. This economy-wide efficiency was enabled through trading energy savings across entities, validating market mechanisms.
3. Why Aggregate Assessment Matters: Despite variations at the micro level, PAT’s success in reducing energy intensity across the board confirms that entity-level targets are secondary. The primary concern for externality-driven markets is the macro-level result, which is where ambition should be judged.

Limitations of Comparing with Past Sectoral Data

1. Historical Modesty Not a Benchmark: The article warns against using past PAT data as a benchmark to assess current CCTS ambition. Previous sectoral reductions may have been modest, but that should not shape future expectations. Emissions cuts must become more ambitious over time.
2. Financial Transfers vs. Emission Cuts: Entity or sectoral targets mainly facilitate financial transfers via market instruments. According to CEEW, they don’t directly ensure emission intensity decline, hence cannot define the ambition level.
3. Focus on Future-Aligned Pathways: Instead of historical comparisons, targets should be judged against pathways aligned with India’s Nationally Determined Contributions (NDCs) and 2070 net-zero goals. This future-focused approach provides a more relevant and ambitious benchmark.

Understanding Sectoral Targets within the Broader Context

1. Current CCTS Target Assessment: Modelling shows that emissions intensity of the manufacturing sector (EIVA) is expected to drop by at least 2.53% annually between 2025 and 2030. However, the average annual reduction across the eight CCTS sectors is only 1.68%between 2023-24 and 2026-27.
2. Slower Industry Decarbonisation: Compared to the power sector’s expected 3.44% annual reduction in emissions intensity, industry appears to be decarbonising more slowly. This indicates that industrial targets may lack the necessary ambition.
3. Limitations of the Current Benchmark: Although only part of the manufacturing base is covered under CCTS, this analysis still offers the best available estimate. Until complete modelling is done, this serves as a provisional measure of ambition.

Conclusion

Ultimately, ambition must be measured by the total reduction in emissions intensity across the economy. Sector-specific efforts are important for trading and compliance, but the real benchmark lies in cumulative national performance.

Question for practice:

Examine whether India’s Carbon Credit Trading Scheme targets reflect sufficient ambition in achieving economy-wide emissions intensity reduction.