Transitioning from energy saving certificates to carbon credits: Evidence from India’s integrated steel industry

• The period from 2023 to 2026 marks the transition phase for industries, shifting from Energy Saving Certificate (ESC) Trading to Carbon Credit Certificates (CCS). • Under PAT Scheme iron and steel industries have reported emission reduction during the five cycles ranging between 7.13% to 13.67%. • DEA-based benchmarking among integrated steel producers suggests that there is a potential for energy intensity reduction of up to 20%, the CCTS must first encash the opportunity for achieving significant reduction during initial years. The Indian iron and steel industry has shown limited progress in reducing energy intensity under the Perform, Achieve and Trade (PAT) scheme. With the forthcoming implementation of the Carbon Credit Trading Scheme (CCTS), many of the challenges experienced under PAT are likely to persist as it closely resembles the PAT framework. This study evaluates the sector’s performance under the PAT regime and reveals that integrated steel producers possess the potential to reduce energy intensity by up to 20%. In contrast, the PAT scheme sets a relatively modest target of just 4.31% by 2024–25. Energy associated emission reductions by the integrated steel producers across the five PAT cycles have ranged between 7.13% and 13.67%. Beyond assessing the sector’s performance, the paper proposes several corrective measures to overcome design shortcomings and improve the effectiveness of the forthcoming CCTS. These include developing a robust framework for emission intensity evaluation and reporting, establishing a long-term emission reduction trajectory with more ambitious targets, creating a stronger market mechanism, ensuring strict compliance, and promoting transparency. Ultimately, the CCTS should act as a catalyst to accelerate emission intensity reductions beyond the current natural rate of improvement.