INTRODUCTION
India has committed to reducing the emissions intensity of its GDP by 45 per cent from 2005 levels by 2030, and to achieving net zero by 2070.[1] To back that up with real action, the government introduced the Carbon Credit Trading Scheme (CCTS), [2]which lets industries buy and sell carbon credits as part of a national market built around reducing emissions.
Every transaction in this market needs a contract. Whether it is a power plant buying credits from a wind farm or a company purchasing offsets from a conservation project, a written agreement sits behind that deal. That agreement is called a Carbon Credit Purchase Agreement or CCPA.
Despite its growing importance, the CCPA remains poorly understood and inconsistently drafted in Indian legal practice. This blog is a concise guide to what the CCPA is, what it must contain, and what legal risks arise if it is not drafted carefully.
WHAT IS A CARBON CREDIT?
A carbon credit is a certificate that proves that one tonne of carbon dioxide equivalent (CO2e) has been reduced, avoided, or removed from the atmosphere.[3] Here is the key thing to understand: a carbon credit is not a permission slip to pollute. It does not allow anyone to emit more than they should. It is simply a record that a real, verified reduction has already happened, for example, because a factory switched to solar energy, a farmer planted trees, or a landfill captured its methane gas before it could escape into the air. In India, it is called a carbon credit certificate. They come in two forms: compliance credits, earned by large industries that cut emissions below government targets, and offset credits, earned by renewable energy developers, farmers, or forest projects that reduce emissions voluntarily. Both types can be bought and sold through a CCPA.
WHAT IS A CARBON CREDIT PURCHASE AGREEMENT (CCPA)?
A CCPA is a legally binding contract between a seller, the entity that holds carbon credits, and a buyer, the entity that wants to purchase them. It sets out the key terms of the deal: how many credits are being sold, at what price, when they will be transferred, and what happens if either party defaults.
A CCPA is essentially a commodity contract, except that the commodity is an environmental certificate rather than a physical product. This creates unique legal challenges, particularly around how “delivery” is defined and how liability is allocated if the credits turn out to be invalid. CCPAs can be used on India’s domestic market (through the ICM, once it is operational) or in international voluntary markets. Many Indian renewable energy and forestry projects already participate in these international markets.
WHAT MUST A CCPA SAY?
A CCPA must get eight things right. The credits must be described precisely, including their type, vintage year, registry, and the project they came from. The quantity and price must be clearly stated, with a formula if the price is market-linked. The contract must define what “delivery” means in practice, the movement of credits from the seller’s registry account to the buyer’s, with a clear date and method specified.
The verification body must be named, and buyers should only accept credits checked by an accredited agency. The seller must give formal warranties, promises that the credits are genuine, not double-counted, not previously sold, and legally compliant. The contract also needs a clause covering unforeseen events like registry downtime or regulatory changes, and must set out consequences if one party fails to deliver or pay, whether a refund, return of credits, or damages. Finally, the CCPA should confirm it is governed by Indian law, particularly the Contract Act 1872[4] and the Energy Conservation (Amendment) Act 2022,[5] with arbitration for any disputes.
INDIA’S LEGAL FRAMEWORK
The CCTS was established under section 14(w) of the Energy Conservation (Amendment) Act 2022, notified in June 2023,[6] with detailed compliance rules published in July 2024.[7] The scheme covers nine sectors.[8]including cement, steel, and aluminium, with obligations starting from April 2025. Credits will be issued through the registry of the Grid Controller of India Limited (GCIL), though this is not yet fully operational.[9] Trading must go through regulated power exchanges supervised by the Central Electricity Regulatory Commission (CERC). Private bilateral deals face real practical hurdles. Critically, there is no standard CCPA template in India, meaning every agreement depends entirely on how carefully it is drafted.
KEY LEGAL RISKS IN INDIAN CCPAS
The most serious risk is double-counting, where the same emission reduction is claimed by both parties, with each counting it toward their own targets. International rules under the Paris Agreement require adjustments to prevent this, and the CCPA must be clear on whether they have been made.[10] Regulatory uncertainty is another concern: India’s market is still developing, and a contract signed today could be disrupted by new rules tomorrow. A solid force majeure clause is essential.
Greenwashing is a growing legal risk. If a buyer purchases invalid credits and makes public environmental claims, they face liability under the Guidelines for Prevention and Regulation of Greenwashing 2024[11] and the Consumer Protection Act 2019.[12] Listed companies face additional disclosure obligations under SEBI’s reporting framework.[13] Finally, it remains legally unsettled whether carbon credits are “goods” under the Sale of Goods Act 1930.[14] Courts have treated electricity as a good despite being intangible,[15] And the same may apply to carbon credits, but until confirmed, drafting firmly under the Contract Act 1872 is the safest approach.
CONCLUSION
India’s carbon market is being built right now. As it grows, CCPAs will become one of the most important contracts in the sustainability and climate finance space, used not just by large industries but by renewable energy developers, farmers, and conservation projects across the country.
The absence of a standard contract template makes careful drafting critical. A weak CCPA can lead to double-counting disputes, delivery failures, and greenwashing claims. A well-drafted one can be a powerful tool both commercially and for India’s climate goals. For lawyers, understanding the CCPA is no longer a niche skill. It is fast becoming a core part of Indian environmental and commercial law practice.
Author(s) Name: Aastha Patel (O.P. Jindal Global University)
References:
[1] Government of India, ‘India’s Updated First Nationally Determined Contribution Under Paris Agreement (2021-2030)’ (Ministry of Environment, Forest and Climate Change, August 2022) 2.
[2] Energy Conservation (Amendment) Act 2022, s 14(w)
[3] Ministry of Power, Carbon Credit Trading Scheme (Notification SO 2825(E), 28 June 2023).
[4] Indian Contract Act 1872.
[5] Energy Conservation (Amendment) Act 2022.
[6] Ministry of Power, Carbon Credit Trading Scheme (Notification SO 2825(E), 28 June 2023).
[7] Bureau of Energy Efficiency, ‘Detailed Procedure for Compliance Mechanism under the Indian Carbon Market’ (Government of India, July 2024)
[8] International Carbon Action Partnership, ‘Indian Carbon Credit Trading Scheme’ (2025)
[9] International Emissions Trading Association, ‘India’s Carbon Credit Trading Scheme’ (IETA Business Brief, July 2025)
[10] Paris Agreement (adopted 12 December 2015, entered into force 4 November 2016) UNTS 3156, art 6.
[11] . Central Consumer Protection Authority, Guidelines for Prevention and Regulation of Greenwashing or Misleading Environmental Claims (15 October 2024).
[12]Consumer Protection Act 2019.
[13] Securities and Exchange Board of India, ‘BRSR Core — Framework for Assurance and ESG Disclosures for Value Chain’ (SEBI Circular, 12 July 2023).
[14] Sale of Goods Act 1930, s 2(7).
[15] Associated Power Co v Ram Ratan Roy AIR 1970 Cal 75.