India’s newly launched Carbon Credit Trading Scheme is expected to boost emission reductions, particularly benefiting aluminium producers over cement peers for long-term efficiency gains, as per a report by ICRA ESG Ratings. The scheme will assess companies based on their emission-intensity trajectories rather than their size. Emission intensity targets for the aluminium sector vary from 13.72–20.27 tonnes of carbon dioxide equivalent (tCO₂e) for FY26 and 13.30–19.55 tonnes for FY27, with potential cumulative emission deficits rising from around 0.5 million tCO₂e in FY26 to about 1.4 million tCO₂e in FY27.
An average annual emission-intensity reduction of approximately 1.2% suggests early progress towards decarbonization. Cement sector emission deficits are projected to be around 0.5 million tonnes of carbon dioxide equivalent in FY26, increasing to about 1.3 million tonnes in FY27. At a presumed carbon price of $10 per tonne of carbon dioxide equivalent, the financial impact of these deficits is expected to rise from about Rs 171–174 crore in FY26 to Rs 472–483 crore in FY27, the report highlighted.
The report also mentioned that certain aluminium companies could face a profitability impact of up to 3% by FY2027 if emission gaps widen. Achieving an emission intensity reduction of about 1.6% in FY2026 and 5.2% in FY2027 from the FY2024 baseline would enable aluminium producers to meet cumulative targets and reduce reliance on carbon credit purchases. The analysis, which included four primary aluminium companies and ten cement firms, evaluated sector-specific emission intensity targets for the current fiscal year and the next against the FY2024 baseline.
According to ICRA ESG, there is a divergence among companies, with larger producers potentially encountering higher absolute deficits under growth scenarios, while those with improving emission intensity trends are better positioned to manage compliance risks or generate surplus credits. Sheetal Sharad, CRO at ICRA ESG, emphasized that companies accelerating emission-intensity reductions will have a competitive advantage and could unlock value as the carbon market evolves. Timely emission-intensity improvements can significantly reduce exposure, while delayed actions may escalate costs as targets become more stringent.
The ratings agency highlighted that aluminium producers must prioritize renewable energy integration, process optimization, and energy efficiency enhancements to maintain emission reductions, given the sector’s substantial reliance on power.
