Climate legislation in Asia: what China and India require

China and India both run mandatory carbon markets that reach individual companies, not only national governments. China's national emissions trading scheme has operated since 2021 and now covers around 8 billion tCO2, more than 60% of the country's CO2 emissions. India's Carbon Credit Trading Scheme brought legally binding emissions intensity targets into force for about 490 industrial units in the 2026 financial year. Scope, thresholds, reporting duties and published penalties for each are set out below, reviewed in July 2026.

What does China's climate legislation require of companies?

China's binding obligation on companies sits in the national emissions trading scheme, which requires covered installations to monitor their emissions, report them and surrender allowances against them. The national commitments around it are policy direction rather than corporate duties: peak CO2 emissions before 2030, cut CO2 per unit of GDP by over 65% against 2005 levels, and reach carbon neutrality before 2060. In the 2035 NDC submitted in November 2025, China committed for the first time to an absolute reduction, 7 to 10% below peak levels by 2035.

Two changes matter to anyone working from older guidance. The State Council's Interim Regulations on the Administration of Carbon Emission Trading took effect in 2024 and replaced the 2021 trial measures, raising penalties sharply. Coverage then expanded in 2025 beyond the power sector into steel, cement and aluminium smelting, under a Ministry of Ecology and Environment work plan published in March 2025.

How does China's national ETS work?

The China national ETS is an intensity-based cap-and-trade system. Allowances are allocated for free using output-based benchmarking, so the cap is not an absolute limit: it is the sum of the bottom-up allocations to every covered entity, adjusted for actual production levels. ICAP estimates that cap at around 8,000 MtCO2 for 2024, up from around 4,500 MtCO2 in 2019 and 2020. Covered entities may use Chinese Certified Emission Reductions for up to 5% of their verified emissions. Opinions issued in August 2025 by the General Office of the CPC Central Committee and the General Office of the State Council set a direction of travel towards an absolute cap, wider coverage and auctioning, with no implementation date published.

What is the legislation timeline?

• 2021: the national ETS starts operating, under the National Measures for the Administration of Carbon Emission Trading (trial).
• 2024: the State Council's Interim Regulations on the Administration of Carbon Emission Trading take effect, adding enforcement powers and much larger penalties.
• March 2025: the Ministry of Ecology and Environment publishes the work plan bringing steel, cement and aluminium smelting into the national carbon market.
• August 2025: central government Opinions set out a roadmap from an intensity-based cap to an absolute cap. No date has been published for the switch.

Which companies are affected?

• More than 3,300 companies in the power, steel, cement and aluminium smelter sectors, on ICAP's 2024 count.
• The inclusion threshold is annual emissions of 26,000 tCO2 or more in the previous year. Power sector coverage includes combined heat and power plants, and captive power plants belonging to other sectors.
• Covered entities file a monthly emissions report within 40 calendar days of each month end, and an annual report by the end of March for the previous year. Provincial ecological and environmental authorities organise verification.
• Petrochemicals, chemicals, flat glass, copper smelting, paper and aviation are expected to follow. Entities in those sectors have had monitoring and reporting obligations since 2015, so treat them as pending rather than out of scope.

What are the penalties for non-compliance?

• Failing to report, or falsifying a report: a fine from CNY 500,000 up to ten times the illegal gains, under the 2024 Interim Regulations.
• Failing to surrender enough allowances: a fine of five to ten times the market value of the gap. The previous maximum was CNY 30,000, so this is a large increase.
• Refusing to surrender allowances after a warning: deduction from the following year's allocation, and possible suspension of production.
• Verifiers, consultancies and testing organisations involved in MRV data fraud face penalties of up to ten times their illegal gains, plus disqualification.

What does India's climate legislation require of companies?

India's binding corporate obligation is the Carbon Credit Trading Scheme, which sets legally binding greenhouse gas emissions intensity targets for named industrial units. Its legal basis is the Energy Conservation (Amendment) Act 2022, and the scheme itself was notified in June 2023. The Bureau of Energy Efficiency published the Detailed Procedure for Compliance Mechanism under CCTS in July 2024. India's national commitments sit alongside it: emissions intensity 47% below 2005 levels by 2035, and net zero by 2070, both in the updated NDC.

The CCTS is a conversion rather than a new build. It takes over from Perform, Achieve and Trade, the mandatory energy efficiency scheme covering more than 1,000 entities across 13 energy-intensive sectors, and turns that machinery into a carbon market. Seven sectors moved across for the 2026 financial year.

How does India's Carbon Credit Trading Scheme work?

The CCTS is an intensity-based baseline-and-credit scheme, not an absolute cap. Each covered unit holds a greenhouse gas emissions intensity target denominated in tCO2e per unit of product. Units that beat their target earn carbon credit certificates, each worth 1 tCO2e, and units that miss it buy and surrender certificates to cover the shortfall. Certificates trade on India's power exchanges, with the Central Electricity Regulatory Commission as market regulator, and the first certificate trading is expected by mid-2026. Boundaries are gate-to-gate: direct emissions, purchased electricity and heat, plus some Scope 3 in the form of imported and exported intermediary products. Offsets cannot be used in the compliance mechanism, and a separate voluntary crediting mechanism for entities outside it is under development.

What is the legislation timeline?

• 2022: parliament amends the Energy Conservation Act 2001, creating the legal basis for the scheme and for carbon credit certificates.
• June 2023: the Carbon Credit Trading Scheme is notified, establishing the National Steering Committee for the Indian Carbon Market and the administrator roles.
• July 2024: the Bureau of Energy Efficiency publishes the detailed compliance procedure.
• October 2025 and January 2026: emissions intensity targets notified in two phases, first for aluminium, cement, chlor-alkali and pulp and paper, then for petroleum refining, petrochemicals and textiles.
• FY2026 to FY2027: phase one, with legally binding targets built on FY2024 baseline data. New intensity targets are announced every three years.

Which companies are affected?

• About 490 industrial units across seven sectors: aluminium, cement, chlor-alkali, pulp and paper, petroleum refining, petrochemicals and textiles.
• Inclusion follows the Perform, Achieve and Trade thresholds, set by minimum annual energy consumption in tonnes of oil equivalent. Textiles start at 3,000 TOE, aluminium and pulp and paper at 7,500 TOE, chlor-alkali at 12,000 TOE, cement at 30,000 TOE and petroleum refining at 90,000 TOE.
• Iron and steel sits in the scheme's sector list, but its intensity targets had not been notified as of February 2026 on ICAP's record. Treat steel as pending rather than exempt.
• Covered units report emissions annually to the Bureau of Energy Efficiency and their state designated agency within four months of the financial year end, by 31 July. Reports are verified by a carbon verification agency accredited by the Bureau.

What are the penalties for non-compliance?

• A unit that fails to surrender the certificates it owes receives an environmental compensation order from the Central Pollution Control Board, set at twice the average price at which certificates traded during that compliance year's trading cycle.
• Because the penalty is priced off the market, the cost of missing a target is not fixed in advance. Published targets currently run to FY2027.

What does this mean for supply chain and portfolio reporting?

If you buy from or invest in organisations operating in China or India, some of them now hold verified, regulator-facing emissions data that did not exist five years ago. A Chinese power, steel, cement or aluminium entity above 26,000 tCO2 files monthly and annual reports that provincial authorities verify. An Indian unit in one of the seven notified sectors files an annual report verified by an accredited agency. Both are a better starting point than a survey, and both are worth asking for by name.

DitchCarbon provides verified emissions data for over 2 million organisations, so procurement, sustainability and finance teams can measure and act on supply chain and portfolio emissions from one source. Every figure carries its source and change history, and coverage gaps are shown rather than hidden. The DitchCarbon Portal calculator is verified to ISO 14064-3 at limited assurance by UL Solutions, renewed annually, so the output is audit-ready and auditable by your own third-party auditor. Where an organisation publishes nothing, spend-based emission factors fill the gap, and that emission factor methodology was independently assessed by Globus Thenken in August 2025 for Scope 3 categories 1 and 2. The reports sit on the trust centre.

See the coverage on your own supplier and portfolio list

Send us the organisations you buy from or invest in, and see what is already covered, including the entities regulated in China and India, with numbers you can defend within 2 weeks. A recent deployment reached about 60% of a large supplier base within 2 weeks. See how the data works.

If you are on the other side of the request, being asked for emissions data by a customer or an investor, claim your profile and answer once instead of filling in the same survey again.

Sources

Reviewed July 2026. Both schemes are changing, so check the scheme profile before relying on a figure in a filing or a contract.

1. ICAP, China National ETS: icapcarbonaction.com/en/ets/china-national-ets
2. State Council, Interim Regulations on the Administration of Carbon Emission Trading, 2024: gov.cn
3. Ministry of Ecology and Environment, work plan for the national carbon market covering steel, cement and aluminium smelting, March 2025: mee.gov.cn
4. Opinions on advancing green and low-carbon transition and strengthening the development of the national carbon market, August 2025: gov.cn
5. ICAP, Indian Carbon Credit Trading Scheme: icapcarbonaction.com/en/ets/indian-carbon-credit-trading-scheme
6. Bureau of Energy Efficiency, Carbon Credit Trading Scheme, 2023: beeindia.gov.in
7. Bureau of Energy Efficiency, Detailed Procedure for Compliance Mechanism under CCTS, 2024: beeindia.gov.in
8. Greenhouse Gases Emission Intensity Target Rules, 2025: beeindia.gov.in