“The Carbon Credit Trading Scheme offers a significant opportunity to mobilize domestic revenue at scale while advancing India’s climate commitments and safeguarding industrial competitiveness.” — Nishtha Singh and Alistair Ritchie, Asia Society Policy Institute
India’s Carbon Credit Trading Scheme (CCTS) could generate more than $500 billion by 2050 to support industrial decarbonization and a just energy transition, according to a new report released by the Asia Society Policy Institute (ASPI) on July 1, 2026.
The report, Carbon Credit Trading Scheme & Energy Transition Finance: Preparing India for Optimal Use of Compliance CCTS Revenue, was authored by Nishtha Singh, Assistant Director of Climate at ASPI, and Alistair Ritchie, Director of Asia-Pacific Sustainability at ASPI.
The study examines how India can use revenue generated through its Carbon Credit Trading Scheme, launched in 2025 as part of the Indian Carbon Market, to finance the country’s transition toward a low-carbon economy while supporting communities and industries that remain dependent on fossil fuels.
According to the authors, India faces the dual challenge of reducing emissions while protecting workers, industries, and state economies that rely heavily on coal and other fossil fuels.
“India’s transition toward a low-carbon economy requires a financing architecture capable of supporting deep industrial decarbonization, strengthening economic resilience in fossil fuel-dependent regions, and ensuring a just and equitable clean energy transition,” the report states. “The Carbon Credit Trading Scheme offers a significant opportunity to mobilize domestic revenue at scale while advancing India’s climate commitments and safeguarding industrial competitiveness.”
The report argues that auctioning carbon allowances under the CCTS could provide a substantial domestic source of financing. It estimates that auctioning allowances for India’s power sector alone could generate more than $500 billion by 2050. By comparison, the European Union’s Emissions Trading System (EU ETS) had generated approximately $297 billion in revenue by 2025 through allowance auctions.
To channel these funds effectively, the report proposes the creation of two dedicated financing mechanisms.
The proposed Power and Industrial Decarbonization Fund would finance emissions-reduction technologies across the power and industrial sectors while supporting micro, small, and medium enterprises (MSMEs) and industrial clusters in coal-dependent states.
A second mechanism, the State Social and Economic Transition Fund, would assist fossil fuel-dependent states by financing workforce reskilling, economic diversification, MSME development, community infrastructure, and the repurposing of coal mines and coal-fired power plants.
The report also recommends establishing an independent Energy Transition Finance Authority under India’s Ministry of Finance to oversee the collection, allocation, and monitoring of CCTS revenues. The proposed authority would coordinate with central and state governments, industry, financial institutions, civil society organizations, and affected communities, while a Technical Advisory Committee would guide project selection and periodically review funding priorities.
The authors outline a phased implementation roadmap under which revenue generated through the Carbon Credit Trading Scheme could begin funding projects by 2031, with the possibility of advancing revenue mobilization to 2029 based on global best practices.
The report concludes that an effectively designed carbon market could become one of India’s most significant domestic financing tools for achieving its climate goals while supporting long-term economic resilience and a fair transition for communities affected by decarbonization.
ASPI has also announced a virtual discussion titled Aligning Across Hemispheres: The Indo-Pacific Four and the NATO Summit, scheduled for July 9, which will examine outcomes from the recent NATO Summit and broader Indo-Pacific security cooperation.
