A carbon credit is a certificate that shows one metric ton of carbon dioxide (CO₂) or an equal amount of other greenhouse gases has been reduced or removed from the atmosphere. These credits were first introduced in international programs like the Kyoto Protocol’s Clean Development Mechanism (CDM). They give companies a way to balance out their own pollution by putting money into eco-friendly projects that help the environment.
In India, carbon credits can be created under two types of systems: voluntary and compliance. Voluntary means companies choose to do it to be more eco-friendly, while compliance means they are required to do it by rules or laws. These carbon credit systems are now becoming a very important part of India’s plans to fight climate change.
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Why India Is Launching Carbon Credit Markets
India has started working on a well-organized and rule-based Emissions Trading System (ETS), called the Carbon Credit Trading Scheme (CCTS). This new system is being launched in different steps starting from July 2024.
By 2026, there will be a compliance market in place. This means large industries will be required to follow specific emission limits and trade carbon credits accordingly. Alongside this, there will also be a voluntary market, where businesses and sectors like agriculture, tree planting (afforestation), and renewable energy can take part by choice and earn or trade carbon credits.
The main goals of this scheme are:
To reduce the amount of emissions produced per unit of work or product in industries across the country.
To attract private investment and use it for building clean and green infrastructure in India.
To make India a leading center for carbon trading at the global level.
In simple words, this system helps companies cut down on pollution, encourages clean projects, and opens the door for more private money to support eco-friendly development all while helping India become a major player in the world’s carbon market.
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Range of Carbon Credit Prices in India
A. Voluntary Carbon Credit Market in Q1 2024
In the first quarter of 2024, the average price of voluntary carbon credits in India was about US $2.35 per ton of CO₂, which is around ₹194. This price is lower compared to neighboring countries like Sri Lanka, Bangladesh, and Pakistan. This shows that India’s voluntary carbon market is still at an early stage and developing slowly.
B. Expected Launch of Compliance Carbon Market in India
Experts in the industry believe that when India officially starts its compliance carbon credit market, the prices for these credits could begin at around US $10 per ton of CO₂, which is about ₹830. The government and regulators are expected to put rules in place to keep the market stable and avoid sudden or extreme changes in prices in the beginning.
C. Carbon Credit Prices Around the World
Across the world, the price of voluntary carbon credits usually falls between US $8 to US $30 per ton, depending on how good or trustworthy the carbon reduction project is.
Projects with better infrastructure or those considered “high-integrity” often found in developed countries usually get higher prices. On the other hand, basic renewable energy (RE) or energy efficiency (EE) projects tend to receive lower prices in the market.
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What Drives Price Differences?
There are many reasons why the price of carbon credits in India can be different. These are the main ones:
Type of Market: Compliance vs. Voluntary
There are two types of carbon markets: compliance markets and voluntary markets. In the compliance market, companies are legally required to offset their carbon emissions, so there is more demand. Because of this higher demand, the prices are usually higher often starting at around $10 or more per carbon credit.
On the other hand, in the voluntary market, companies or individuals buy credits on their own, without being forced by law. Since demand is lower here, prices are often cheaper.
Quality of the Project & Extra Benefits
Not all carbon credits are the same. If a carbon credit comes from a project that not only cuts carbon but also does other good things like planting trees (afforestation), helping local communities, supporting forests, or promoting fair-trade practices then it is seen as more valuable. These extra benefits are called co-benefits.
Because of these, such carbon credits usually sell at a higher price. For example, in Europe, the average price for carbon credits is between €8 to €13 per ton, and the ones with extra benefits are sold for even more.
Location of the Project & Certification Process
Where the carbon credit project is located also matters. Plus, how well it is checked and certified makes a big difference. If a project is approved by trusted international organizations like Gold Standard or Verified Carbon Standard (VCS), and if it also has proper local checking and verification, then buyers trust it more. This trust increases the price.
Supply and Demand in the Market
Right now, there is not a lot of supply in the voluntary carbon market in India. Also, the compliance carbon market is still growing slowly. Because of this, the prices stay low for now.
But once the Indian compliance market becomes fully active, more companies will need carbon credits. This will increase demand and reduce supply, which means prices are likely to go up in the future.
INR Equivalents: Per‑Ton Price in Rupees
Rough INR conversions:
- US $2.35 ≈ ₹194
- US $10 ≈ ₹830
Indian market could scale from ₹200/t now to ₹800–1,000 in early compliance markets. Premium projects with strong co‑benefits likely command ₹1,000+ per ton.
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How Much Can India’s Carbon Market Grow?
Voluntary and compliance combined could reach US $1 billion+, per RBI and policy experts.
By 2030, estimates forecast US $10–35 billion globally; India expected to secure a strong portion.
What Impacts a User’s Decision?
A. Why Buyers Care
Companies that are part of industries like power, steel, or cement must follow government rules to reduce pollution. These companies buy carbon credits to meet those rules, so they don’t get into trouble.
Other companies, especially those that care about the environment and want to improve their brand image through Corporate Social Responsibility (CSR), also buy carbon credits. They do this to show they are helping the planet and to prove that they are offsetting their carbon emissions in a trustworthy and genuine way.
B. Why Sellers Care
Farmers, rural communities, and people who plant trees or take care of forests can earn extra income by creating carbon credits. This happens when their activities, like planting trees or using clean farming methods, reduce carbon in the air more than usual. The extra carbon savings can be turned into credits and sold.
Projects that are based on nature, like planting forests, and that follow fair-trade practices can get their credits verified by trusted agencies. These verified carbon credits are more valuable in the market and sell at better prices, helping the sellers earn more money.
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Forecast: Prices & Market Trajectory
Voluntary Market (2025):
In 2025, the price of one carbon credit in the voluntary market is expected to be between ₹200 to ₹400 per tonne, which is around US $2 to $5. This is the market where businesses or individuals choose to offset their emissions on their own, without any legal requirement.
Compliance Market (Post-2026):
From 2026 onwards, in the compliance market (where companies are required by law to offset their emissions), the cost of one carbon credit is expected to rise to ₹800 to ₹1,200 per tonne, which is around US $10 to $15.
Premium or Nature-Based Credits:
Carbon credits that come from high-quality nature-based projects, like planting trees or protecting forests especially those that also bring other benefits to local communities or the environment can be sold at a higher price. These may cost around ₹1,200 to ₹2,000 per tonne, which equals roughly US $15 to $25.
This pricing is in line with global trends, where high-integrity projects (projects that are reliable, impactful, and verified) are often priced between US $8 to $30 per tonne or even more.
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Key Takeaways
In the voluntary carbon market, as of the first quarter of 2024, the price of one carbon credit in India is generally between ₹200 and ₹300 for every tonne of carbon dioxide (tCO₂). When converted to US dollars, this comes to about $2 to $3 per tCO₂. This market is called “voluntary” because businesses or individuals choose to offset their carbon emissions on their own, without being legally required to do so.
Looking ahead to 2026, the early compliance carbon market is expected to begin. In this market, carbon credits are likely to be priced higher—between ₹800 and ₹1,000 per tonne of CO₂, which is around $10 to $12 in US dollars. This market will be part of a government-regulated system where certain industries must follow rules to reduce emissions, so demand and pricing will be more structured.
There is also a segment known as premium carbon credits. These credits come from high-quality projects that often provide additional social or environmental benefits, such as protecting forests or supporting local communities. Because of their added value, these premium credits are more expensive, typically costing between ₹1,200 and ₹2,000 or more per tonne of CO₂. In US dollars, that’s around $15 to $25 or even higher per tCO₂.
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What to Watch: Market Drivers
CCTS Roll-Out (2024):
The government will start rolling out Carbon Credit Trading Schemes (CCTS) from 2024. This system will include fixed rules and procedures for projects related to renewable energy, green hydrogen, energy efficiency (EE), and mangrove restoration. These projects will follow standard processes to ensure they qualify for carbon credits.
Carbon Credits:
Carbon credits are gaining more importance. They are becoming a key part of how countries and companies manage their carbon emissions. Two extra points to note here:
Carbon credits are useful for reducing emissions in a structured way.
Their value is increasing as more people and companies are becoming aware of their role in fighting climate change.
Press Information Bureau:
The Press Information Bureau (PIB) will be regularly releasing updates and official information related to carbon credit systems. It will help everyone stay informed about new rules and developments in this area.
Compliance Launch (2026):
By 2026, the carbon credit system will also include major industries like oil and gas, metal production, electricity generation, and fertilizers. These industries will need to follow certain rules and limits on emissions and will have to use carbon credits to meet their targets.
S&P Global:
S&P Global reports that the government plans to use a reserve fund to help balance the supply and demand for carbon credits. If demand drops at any time, the government can use this buffer to keep the market stable and avoid big price changes.
Project Quality & Certification:
The better the quality of a carbon project, and the more trusted the certification it has, the higher the price it can get in the carbon market. Buyers are willing to pay more for credits that are proven to be real, effective, and also deliver benefits beyond just emission cuts (like supporting communities or nature).
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What Buyers & Sellers Should Do
Buyers (Companies & CSR teams):
If you’re buying carbon credits, start by checking whether your need is mandatory (compliance-based) or voluntary (CSR, sustainability goals).
Always choose carbon credits that are verified and certified.
Prefer credits that offer extra benefits like improving local communities or protecting biodiversity.
Project Developers:
If you’re creating a carbon credit project, focus on areas that give high returns, like:
Planting and protecting mangroves
Producing green hydrogen
Improving energy efficiency (EE)
Also, make sure your project gets certified by a trusted authority. This increases trust and helps you sell the credits at a better price.
Investors:
If you’re planning to invest in the carbon market, look closely at the sector-specific trends. Focus on sectors with strong potential, such as:
Forestry projects
Renewable and clean energy
Agriculture and land-use projects
These sectors are expected to grow fast and give good returns in the coming years.
Also Read: Can Carbon Credits Effectively Reduce CO₂ Emissions?
FAQs
Q: What is the current average carbon credit price in India?
A: Approximately US $2.35/t (~₹200) in Q1 2024 voluntary market
Q: Will prices exceed US $10?
A: Yes compliance entry expected to start around US $10/t (~₹830)
Q: What types of credits pay most?
A: Nature‑based and high-integrity projects (forestry, mangroves, social benefits) fetch US $15–30+/t (~₹1,200–2,500+) .
Q: How reliable are Indian standards?
A: India’s system leans on UN‑approved CDM, Gold Standard, VCS; new CCTS methodologies enhance credibility
Q: Could prices decline?
A: Possible if credits oversupply voluntary market, but compliance demand and reserve mechanisms should buffer sharp drops.