India has officially notified its first legally binding Greenhouse Gas Emission Intensity (GEI) Target Rules, 2025, setting emission reduction targets for industries identified as carbon-intensive. The Ministry of Environment, Forest and Climate Change issued the notification on October 8, 2025, following a draft released in April.
These rules mandate 282 industrial units across the aluminum, cement, chlor-alkali, and pulp and paper sectors to lower their greenhouse gas emissions per unit of output, relative to a baseline from 2023-24. The move operationalizes the Energy Conservation (Amendment) Act, 2022, empowering the government to establish a domestic carbon market.
The GEI Rules define emission intensity as the quantity of greenhouse gases emitted for each unit of product produced. For example, this refers to the gases released during the production of one tonne of cement or aluminum. Under the GEI framework, those industries which meet or exceed their targets will be issued carbon credits by the Bureau of Energy Efficiency. Units falling short of their targets must purchase credits or pay environmental compensation to the Central Pollution Control Board (CPCB). This initiative aims to operationalize India's domestic carbon market under the Carbon Credit Trading Scheme (CCTS), 2023, establishing a mechanism to trade emission credits and encourage cleaner production.
Of the 282 units covered, 186 are in the cement sector, 13 in aluminum, 30 in chlor-alkali, and 53 in pulp and paper. Major corporations, including Vedanta, Hindalco, Ultratech, JSW Cement, Dalmia, Shree Cement, and JK Paper, are among those affected by the new targets.
Emission reduction targets will vary. According to an analysis by Down to Earth magazine, the targets will range from 2-3% in 2025-26, increasing to 7.5% by 2026-27. Pulp and paper units may face cuts as high as 15%. Targets for the cement sector range from 4.7% to 7.6%. Emission intensity reduction targets range from about 3.4 per cent over two years in the cement sector to about 5.8 per cent in aluminium, 7.5 per cent in chlor-alkali and 7.1 per cent in pulp and paper, based on the baseline year.
The GEI Rules replace the earlier Perform, Achieve, and Trade (PAT) scheme by adding a market-based trading system to India's industrial decarbonization efforts.
Facilities that emit less than their assigned target can earn tradable carbon credit certificates, while those exceeding the target must purchase equivalent credits from the Indian carbon market or pay a penalty. The penalty, termed "environmental compensation", will be twice the average trading price of carbon credits during that compliance year. The BEE will determine the average price, and the CPCB will impose and oversee recovery of penalties, which must be paid within 90 days.
India has committed to reducing the emissions intensity of its gross domestic product by 45% by 2030 compared to 2005 levels, as part of its domestic commitments under the global agreement, and achieving net zero by 2070.
