An intensity-based, baseline-and-credit market suits a developing economy but limits how much carbon is cut. Critically evaluate this with reference to India's CCTS.

India's Carbon Credit Trading Scheme (CCTS) was notified in 2023 under the Energy Conservation (Amendment) Act, 2022 [2]. It sets targets on greenhouse gas (GHG) emission intensity (emissions per unit of output), not on absolute emissions [1]. Firms that beat their targets earn tradable Carbon Credit Certificates (CCCs) [1]. The design protects growth, but as it stands it gives up depth of decarbonisation.

Why the design suits a developing economy

• Room to grow: there is no absolute cap, so output of cement, aluminium and refineries can rise while efficiency improves [1][5].
• Fits India's climate stance: it matches India's NDC, which is framed in terms of emission intensity of GDP, and the principle of common but differentiated responsibilities.
• Reward, not just punishment: efficient firms earn money from their surplus, and firms that fall short buy credits [1].
• Gradual, learning-based rollout: it builds on the PAT scheme, and coverage grew in stages to 490 obligated entities by January 2026 [3].

Why it limits carbon cuts

• Total emissions can still rise: intensity can fall while output grows. The market therefore does not guarantee an absolute reduction [5].
• Oversupply risk, as seen in PAT: about 103 lakh ESCerts were issued against obligations of only about 52 lakh, and in Cycle II all trades cleared at the floor price [5]. Lenient baselines produce cheap credits, and cheap credits give firms no reason to invest in clean technology.
• Weak deterrent: the penalty is twice the average CCC price [5]. If credits are cheap, the penalty is cheap too. China's penalties are 5–10 times the market price [5].
• Narrow coverage: thermal power, which produces about 40% of India's GHG emissions, has not been moved from PAT to the CCTS [4][5].

Verdict The trade-off is real, but it does not come from the design itself. Intensity targets can drive deep cuts if baselines are strict. The CCTS falls short today because its targets are lenient and its coverage is narrow.

The baseline-and-credit model is therefore a sound starting point for India, and its climate value depends on calibration. Baselines should be tightened every cycle, thermal power brought in on a fixed timeline, and the penalty strengthened. As the market matures, India can move gradually towards caps [5]. This sequence would balance development with climate justice and advance SDG 13 without giving up equity.