According to www.thehindubusinessline.com, India’s Carbon Credit Trading Scheme (CCTS) is set to tighten significantly by FY2027, raising carbon compliance costs — particularly for cement and aluminium producers — with potential profit impacts of up to 19 per cent for some cement firms and up to 3 per cent for certain aluminium players.
Transition Year vs. Tightening Phase
The ICRA ESG analysis examined 14 major companies — 10 cement and 4 aluminium — and found that FY2026 serves as a relatively manageable transition year. In FY2026, cement companies can largely meet emission targets by reducing emission intensity by about 1.5 per cent. However, if emissions remain flat or rise, firms may face shortfalls requiring carbon credit purchases. Some early movers could even generate surplus credits for sale.
By FY2027, the compliance burden escalates markedly. Around 30 per cent of cement companies could face deficits even under favourable conditions. In adverse scenarios, the financial impact could reach up to ₹700 crore, and carbon costs could erode profits by as much as 19 per cent for select firms.
Emission Reduction Targets by Sector
- Cement: Companies need to cut emission intensity by 0.7 per cent in FY2026 and 2.7 per cent in FY2027, both relative to FY2024 levels.
- Aluminium: Firms must reduce emission intensity by 1.6 per cent in FY2026 and 5.2 per cent in FY2027, again versus FY2024. The report notes that if production grows while emissions stay constant, none are likely to meet FY2027 targets.
Competitive Implications for Supply Chain Professionals
For global supply chain professionals sourcing from or operating within India’s industrial base, these developments signal material cost volatility ahead. Cement and aluminium are foundational inputs across construction, automotive, packaging, and infrastructure sectors — meaning upstream carbon cost shocks will cascade through procurement contracts, landed cost calculations, and supplier risk assessments. Smaller, more efficient firms may gain pricing leverage by achieving early reductions, while larger incumbents face margin pressure unless they embed decarbonisation into capital planning and supplier engagement frameworks. Steady annual reductions of 1–3 per cent for cement and 2–5 per cent for aluminium are identified as essential to control costs and maintain competitiveness.
“FY2026 offers a transition period with manageable costs, but FY2027 will significantly increase pressure. Large companies may see profits hit by carbon costs, while smaller, more efficient players could gain an advantage by cutting emissions faster.” — ICRA ESG analysis
Source: www.thehindubusinessline.com
Compiled from international media by the SCI.AI editorial team.
