E-Paper
Carbon Credit Trading scheme revenues can power India’s cleantech future
This article is authored by Jagjeet Sareen and Alistair Ritchie.
The goal of reaching net-zero emissions by 2070 positions India to advance its climate agenda while enhancing its industrial strength globally. Achieving decarbonisation at a scale will require massive deployment of clean energy, advanced batteries, electric mobility, hydrogen, and green industrial processes, all of which hinge on robust domestic manufacturing ecosystems. Without building these value chains at home, India risks deepening its dependence on imports for the very technologies driving the transition, while missing a historic chance to position itself as a leader in the next wave of global manufacturing.
The National Manufacturing Mission announced in the Union Budget signals the intent: a deliberate push on cleantech manufacturing, announced by the finance minister in her Union Budget speech, is a landmark step towards building a green, clean and Viksit Bharat. The next requirement is that of a financing architecture that is reliable, stable, and that can be scaled to the ambition.
The newly introduced Carbon Credit Trading Scheme (CCTS) can be the long-term financing engine needed to build this domestic manufacturing capability. Auctioning of allowances or credits in the CCTS, where one allowance equals one tonne of CO2 emissions, can generate significant revenue for the government. If allowance auctioning is introduced in the power sector, analysis indicates the scheme could raise at least $ 500 billion by 2050. This is a multi-decade, transition-linked revenue stream that can create both economic competitiveness and climate resilience.
There is a clear international playbook. Globally, emissions trading systems (ETSs) have so far generated over $ 370 billion mainly from auctioning of allowances. The EU ETS has generated over $ 250 billion, channeled through the Innovation Fund, Modernisation Fund and member State initiatives that accelerate renewable deployment, energy efficiency and uptake of innovative decarbonisation technology. Japan is mobilising $ 120 billion of upfront investment for hard-to-abate industrial sectors through climate transition bonds backed by future ETS revenues and fossil fuel levies. California’s Cap-and-Trade Program has already generated over $ 30 billion for measures ranging from distributed solar to electric mobility.
India can adapt this approach credibly and quickly. The National Manufacturing Mission provides an institutional chassis to align CCTS proceeds with industrial priorities. On the demand side, early estimates from Bharat Climate Forum, a multi-stakeholder platform focusing on cleantech manufacturing, suggest that achieving an indigenisation target of 50% for solar, wind and batteries would require financing of ₹4–6.3 lakh crore ($ 50–75 billion) by 2030, with government support of ₹2.8–3.9 lakh crore ($ 34 – 47 billion). On the supply side, the CCTS can provide predictable funding over time to meet that requirement, converting a climate instrument into an industrial financing mechanism.
A practical pathway is to establish a Cleantech Manufacturing Fund, capitalised by CCTS revenues and jointly managed by the ministry of finance and the National Manufacturing Mission, with a mandate linked to outcomes rather than scattered across schemes. The fund should target three priorities.
First, it should close cost competitiveness gaps. Today, Indian solar cells are estimated to be 5–8% costlier than Chinese imports, while batteries are priced about 13–15% higher. Well-designed, time-bound instruments such as smart subsidies and energy cost relief can bridge these margins, making Indian manufacturing viable at scale.
The second task is to finance the innovation that will define the industrial competitiveness over the next two decades. Perovskite solar, advanced battery chemistries, and hydrogen-based steelmaking are the next tranche of performance and cost breakthroughs. A defined share of carbon revenues should support late-stage R&D, test beds, and commercialization, much as the EU’s Innovation Fund has done for European industry.
The third priority is investing in raw material security and skill development. India must reduce its dependence on imported lithium, cobalt, and graphite by expanding domestic refining, recycling, and circular economy solutions to capture more value locally and limit vulnerability to global shocks. At the same time, strengthening supplier capabilities through modern tool rooms, certification systems, and MSME development can raise quality across the ecosystem. Equally critical is talent: updated manufacturing curriculums, targeted global fellowships, and strong industry–academia partnerships will be essential to build and sustain the skilled workforce required for the sector’s growth.
India’s cleantech manufacturing ambition is about more than energy security or import substitution. It is about positioning the country as a global hub for green manufacturing. With supply chains shifting and countries looking to diversify away from concentrated markets, India has a once-in-a-generation opportunity to emerge as a credible, large-scale producer.
Backed by the National Manufacturing Mission, CCTS revenues can be mapped to outcomes: cost reductions, innovation and supplier upgrades. The CCTS can become the financial engine for this transformation. Instead of letting carbon pricing revenues vanish into fiscal black holes, India can redeploy them to build the industries of the future, from solar and storage to hydrogen.
The choice before policymakers is clear: use carbon finance to underwrite India’s dependence on imports or harness it to build the foundation of a green, globally competitive economy.
This article is authored by Jagjeet Sareen, partner, Dalberg Advisors, New Delhi and Alistair Ritchie, director, Asia-Pacific Sustainability, Asia Society Policy Institute.
