Greenhouse Gases Emissions Intensity (GEI) Target Rules, 2025: Pros & Cons

In April 2025, India’s Ministry of Environment, Forest and Climate Change released draft Greenhouse Gases Emissions Intensity (GEI) Target Rules, 2025, drawing significant media attention. The rules propose industry-specific GHG intensity reduction targets for energy-intensive sectors such as cement, aluminium, pulp & paper and chlor-alkali. They establish 2023–24 as a baseline year and set phased intensity targets for FY 2025–26 and 2026–27 under India’s new Carbon Credit Trading Scheme. Covering about 282 industrial units, the GEI rules aim to accelerate decarbonisation in core industries while supporting India’s Paris Agreement commitments, though analysts note concerns on enforceability and scope.

Definition and Key Features of GEI Rules

• Definition: GEI measures the greenhouse gas emitted per unit of product or output (e.g., tonnes of CO2-equivalent per tonne of cement).
  • Uses tCO2e units to account for all GHGs (CO2, CH4, N2O, etc.) by their global warming potential.
• Draft Rules: The GEI Target Rules, 2025 were notified by MoEFCC on April 16, 2025.
  • These are draft regulations setting targets for reducing emissions intensity in specified industries.
• Baseline & Targets:
  • Financial year 2023–24 serves as the baseline for measuring emissions intensity for each unit.
  • Targets are fixed for the compliance periods FY 2025–26 and FY 2026–27, requiring gradual reductions in intensity by those years.
• Covered Sectors:
  • Applies to cement, aluminium, pulp & paper, and chlor-alkali sectors.
  • Affects roughly 282 industrial facilities: 13 aluminium plants, 186 cement plants, 53 pulp & paper plants, and 30 chlor-alkali units.
  • Major companies in scope include UltraTech Cement, Hindalco, JK Cement, JK Paper, among others.
• Compliance:
  • “Obligated entities” in these sectors must meet or exceed the intensity targets.
  • Firms reducing intensity below the target earn carbon credits; firms exceeding targets must buy credits or face penalties.
  • The rules link directly to India’s carbon market, making industrial emissions trading a compliance mechanism.

Purpose and Rationale Behind the Rules

• Climate Commitments:
  • Supports India’s Paris Agreement pledge to reduce emissions intensity of GDP by 45% (vs. 2005) by 2030, reinforcing Nationally Determined Contributions (NDCs).
  • Sets a tangible path to lower industrial carbon footprint in line with national goals.
• Promoting Low-Carbon Growth:
  • Pushes heavy industries to improve energy efficiency and adopt cleaner processes. For example, a cement plant may switch from coal to biomass fuel or use waste heat recovery to cut its GEI.
  • Drives investment in renewable energy and low-carbon technologies within industry.
• Operationalizing Carbon Market:
  • Ensures active demand and supply in India’s Carbon Credit Trading Scheme (CCTS).
  • Industries meeting targets generate credits they can sell; those missing targets must procure credits, creating a market incentive to reduce emissions.
• Mitigating Emissions:
  • Directly targets some of India’s largest industrial GHG sources, contributing to overall emission reduction efforts.
  • Also helps curb local pollution by encouraging cleaner production methods.
• Example:
  • If a cement plant’s baseline GEI is 0.25 tCO2e/tonne, and the 2025–26 target is 0.24, the plant must cut intensity by 4%. Achieving 0.22 earns credits; ending at 0.26 creates a credit shortfall to offset.

Geographical Scope and Applicability

• Geographical Coverage:
  • Rules apply nationwide to all qualifying facilities in the specified sectors.
  • Major industrial states (e.g., Rajasthan, Maharashtra, Gujarat, Tamil Nadu, Odisha) with clusters of cement, aluminium or chemical plants are included.
• Industrial Clusters:
  • Cement belt areas (like Chhattisgarh, UP, TN), aluminium hubs (Odisha, Chhattisgarh), pulp & paper regions (Assam, Gujarat) and chlor-alkali zones (Gujarat, TN) are directly impacted.
• Global Context:
  • While India’s GEI rules are domestic, they mirror international trends of sectoral emission limits. For instance, the EU’s Emissions Trading Scheme covers power and manufacturing in all member states.
  • India’s approach introduces an intensity-based mechanism similar in spirit to some earlier global policies, but it remains relatively unique in targeting specific industries at this scale.

Relevance of GEI Rules to India

• Integration with National Policy:
  • GEI rules align with India’s broader climate strategy (e.g., COP26 Panchamrit targets) and with the country’s commitment to net-zero by 2070.
  • They complement the 2022 update of India’s NDC, translating those broader goals into actionable industry standards.
• Carbon Market Development:
  • The rules give practical meaning to the Carbon Credit Trading Scheme (2023) by creating obligatory demand for carbon credits.
  • Makes India one of the first large economies to impose mandatory intensity limits, positioning it as a proactive player in carbon markets.
• Policy Synergies:
  • Builds on existing schemes like the Perform, Achieve and Trade (PAT) program (which targets energy efficiency) by specifically focusing on carbon intensity.
  • Involves multiple agencies: the Bureau of Energy Efficiency (MoP) oversees the carbon market platform, while CPCB enforces environmental regulations.
• Economic Impact:
  • Affects core sectors of the economy; industries may incur costs for cleaner tech or credits, but can also profit by selling extra credits.
  • Potentially spurs green growth by creating demand for pollution control equipment and renewable energy in manufacturing regions.
• Global Alignment:
  • Complements international actions (China’s carbon intensity targets, EU trading system) and could help India negotiate climate commitments by showing domestic progress.

Timeline and Duration of Implementation

• Notification:
  • Draft rules were officially notified on 16 April 2025, triggering a 60-day consultation period for feedback from industry and public.
• Compliance Periods:
  • Targets apply for FY 2025–26 and FY 2026–27 (financial years). Companies must achieve the set intensity levels by the end of each period.
  • The compliance timeline is relatively short (two years), emphasizing immediate action.
• Timeline Context:
  • Baseline GHG and production data come from FY 2023–24.
  • Final rules (post-feedback) are expected by late 2025; enforcement would then begin in 2026.
  • These targets cover a bridge period to India’s 2030 goals; future rule cycles will likely set new targets beyond 2027.
• Related Milestones:
  • Follows India’s updated NDC submission (2022) and launch of the national carbon market (2023).
  • By the end of this scheme (2027), India aims to be closer to its interim climate goals and better prepared for longer-term commitments.

Responsible Stakeholders and Participants

• Government Authorities:
  • MoEFCC (Ministry of Environment, Forest and Climate Change) formulated and notified the draft rules.
  • BEE (Bureau of Energy Efficiency, MoP) manages the carbon credit registry and market operations.
  • CPCB (Central Pollution Control Board) collects emissions data and enforces compliance (issuing penalties via CPCB/state boards).
• Obligated Industries:
  • Aluminium: Major producers like Vedanta, Hindalco, Bharat Aluminium, etc.
  • Cement: Players such as UltraTech, Dalmia, Shree Cement, JSW Cement, JK Cement, etc.
  • Pulp & Paper: JK Paper, West Coast Paper, and other large mills.
  • Chlor-alkali: Chemical manufacturers (e.g., Tamil Nadu Alkali, Gujarat Alkalies) in electrolyte production.
  • In total, roughly 282 units bear obligations under these rules.
• Other Stakeholders:
  • State Pollution Control Boards assist CPCB in monitoring factories locally.
  • Authorized Carbon Exchanges/Registries (designated by government) facilitate credit trading.
  • Third-party Auditors/Verifiers (certified by regulators) may audit reported emissions and output for accuracy.

Mechanism and Functioning of GEI Rules

• Measurement & Reporting:
  • Each unit calculates annual GEI = (Total GHG emissions in tCO2e) ÷ (Total output). Output can be product weight (tonnes) or other standardized unit.
  • Emissions are monitored via meters and sensors; production data come from manufacturing logs.
  • Results are reported to CPCB. Accredited auditors verify the data to prevent manipulation.
• Intensity Targets:
  • The rules specify a GEI limit (benchmark) for each unit or sector in each year.
  • For example, a cement plant might have a target of 0.22 tCO2e/tonne for 2025–26 and 0.21 for 2026–27 (illustrative values).
  • If actual GEI is below the target, the unit is compliant (and may earn credits); if above, it has a compliance shortfall.
• Carbon Credit Mechanism:
  • Units that beat targets (emit less per product than required) earn carbon credits (e.g., 1 credit per tonne CO2e saved).
  • Units failing to meet targets must buy credits from the market to offset excess emissions, or face penalties.
  • Credits can be bought/sold on approved carbon exchanges; prices fluctuate with supply and demand.
• Enforcement:
  • At year-end, companies must surrender enough credits to match any excess emissions (shortfall). CPCB audits this process.
  • Non-compliance penalties include fines or legal action under environmental laws.
• Example:
  • A cement company has a baseline GEI of 0.25 tCO2e/tonne and a 2025–26 target of 0.24. If it achieves 0.22, it can generate credits for the 0.02 margin and sell them. If it only reaches 0.26, it must offset 0.02 tCO2e per tonne by purchasing credits (e.g., from another firm or project) or pay a penalty.

Industrial and Technological Applications

• Industrial Planning:
  • Firms can use GEI calculations to identify inefficiencies and prioritize upgrades (e.g., new kilns or boilers). It helps in forecasting production costs under carbon constraints.
  • Companies may integrate GEI targets into sustainability reports or investment appraisals, showing compliance to regulators and investors.
• Finance & ESG:
  • Banks and investors may incorporate GEI metrics into green financing criteria. A lower GEI could improve a company’s ESG (Environmental, Social, Governance) rating and access to capital.
• Technology Deployment:
  • The need to meet GEI targets drives demand for clean technologies (renewable energy, carbon capture, process automation). Industries can generate carbon credits by adopting approved clean solutions.
• Policy Development:
  • Government can use aggregate GEI data to shape future climate policies or carbon budgets. As compliance data accumulate, it informs adjustments to targets or expansion of sectors.

Broader Climate and Economic Significance

• Climate Leadership:
  • Marks India’s shift from voluntary norms to binding industry targets, reinforcing commitments under the Paris Agreement.
  • Puts India on track to meet its NDCs by introducing a transparent system for industrial emissions.
• Industrial Transformation:
  • Signals to factories that decarbonization is mandatory, likely accelerating upgrades to low-carbon technology (e.g., efficient kilns, solar power, biomass use).
  • Companies exceeding targets can profit by selling excess credits, creating a market incentive for emission cuts.
• Economic Impact:
  • Aligns Indian industry with global trends: as carbon pricing and border taxes spread, companies with lower GEI will be more competitive internationally.
  • Mobilizes private investment into clean energy projects and waste-heat recovery in manufacturing hubs, potentially boosting jobs in green sectors.
• Policy Advancement:
  • Represents policy maturity: complementing the PAT energy efficiency scheme and Clean Energy Cess, the GEI rules specifically target carbon intensity.
  • Strengthens India’s nascent carbon market by generating demand for credits, which can improve market stability and credibility.
• Data & Accountability:
  • Systematic reporting of GEI creates a valuable emissions dataset, enhancing tracking of India’s industrial carbon footprint.
  • Establishes accountability; firms known to violate targets may face reputational or legal consequences, encouraging compliance.

Identified Limitations in Current Framework

• Limited Scope:
  • Only four sectors are covered. Key emitters like steel, power generation, oil & gas and transport are not included, leaving much of India’s CO2 outside these rules.
• Short-Term Focus:
  • Targets exist only for 2025–26 and 2026–27. There is no guaranteed follow-up beyond 2027, creating uncertainty for long-term planning.
• Intensity vs Absolute Emissions:
  • Targets are intensity-based: if industrial output rises significantly, total emissions could still grow even as intensity falls. This may undermine absolute emissions reductions.
• Enforcement Challenges:
  • Relies on accurate self-reporting; firms might under-report emissions or overstate output without stringent audits.
  • Regulatory bodies (CPCB, SPCBs) have limited manpower; consistent enforcement across all units could be difficult.
• Economic Concerns:
  • Stricter targets may raise production costs. Companies unable to buy credits might reduce output or lay off workers.
  • If buying credits is cheaper than investing in clean tech, industries may opt to pay rather than innovate, delaying genuine decarbonization.

Key Challenges in Implementation

• Technical and Financial:
  • Upgrading equipment or shifting to clean fuels requires heavy capital; not all firms can afford it quickly. Small plants may lack technical know-how for compliance.
  • Developing a reliable carbon trading infrastructure (exchanges, registries) is complex and resource-intensive. Ensuring market liquidity and transparent pricing will take time.
• Regulatory Coordination:
  • Multiple agencies (MoEFCC, CPCB, BEE, State Boards) must cooperate smoothly. Any bureaucratic overlap or delay could hinder rule implementation.
  • Clear guidelines and training are needed so that inspectors can verify emissions intensity accurately.
• Market Uncertainty:
  • Since India’s carbon market is new, companies may be unsure of credit prices or availability, complicating their compliance strategy. Volatile prices could emerge as supply and demand fluctuate.
• Economic Impact:
  • Elevated production costs may lead industries to lobby for easier targets or to pass costs to consumers. Balancing climate goals with affordable goods and industrial growth is politically sensitive.
• Global Trade:
  • Indian exports of cement or aluminium with a high GEI may face import restrictions or carbon tariffs abroad. The rules will need to ensure domestic industries can compete internationally.
• Data Accuracy:
  • Ensuring consistent, high-quality emissions data reporting is tough. Lack of standardized monitoring equipment or procedures across all plants can create inconsistencies.

Comparative Analysis with Global Standards

Strategic Roadmap and Way Forward

• Expand and Extend:
  • Gradually include more sectors (steel, chemicals, power plants) and lengthen the timeline of targets beyond 2027 to cover mid- and long-term goals.
  • Align new intensity targets with India’s 2030 NDC and net-zero 2070 roadmap for sustained impact.
• Strengthen Implementation:
  • Invest in advanced monitoring technology (e.g., continuous emission trackers, IoT sensors) to improve data accuracy.
  • Offer subsidies, tax incentives or low-interest loans for industries to adopt green technologies (carbon capture, green hydrogen, efficient furnaces).
• Carbon Market Development:
  • Build a robust carbon trading platform with clear rules on credit quality and banking of unused credits between periods.
  • Consider linking India’s carbon market with international markets over time, subject to UNFCCC rules.
• Policy Integration:
  • Coordinate GEI rules with other initiatives (Renewable Purchase Obligations, energy efficiency schemes) to create a coherent climate action package.
  • Use results from GEI compliance to adjust national carbon budgets and inform future NDC updates.
• Stakeholder Engagement:
  • Keep dialogue open with industry, academia and civil society to review targets and implementation challenges.
  • Leverage international climate finance and technology transfer to ease industry transitions.
• Transparency and Reporting:
  • Publicly disclose aggregated emissions and progress to build confidence in the system.
  • Encourage companies to voluntarily report GEI metrics to investors, promoting accountability and continuous improvement.

Conclusion

In conclusion, the Draft GEI Target Rules, 2025 represent India’s first experiment in binding industry-specific carbon intensity regulation. By linking sectoral targets to the Carbon Credit Trading Scheme, they turn broad climate pledges into concrete obligations for polluters. The rules are significant for incentivizing clean technology and strengthening India’s emerging carbon market. However, their limited scope and short timeframe mean they are only an initial step; absolute emissions could still rise as industries expand. To be effective, these rules must be enforced strictly and expanded over time, accompanied by support for affected industries. Overall, the GEI rules are a positive move towards India’s climate goals, but continued policy evolution will be needed to ensure deep, economy-wide decarbonization.

Practice Question: Critically evaluate the significance of the GEI Target Rules, 2025 for India’s climate goals, highlighting major challenges and ways forward. (Answer in 250 words)