Carbon costs for cement and aluminium to rise as India's new climate rules tighten by FY2027: ICRA ESG
New Delhi, April 23
India's Carbon Credit Trading Scheme is expected to become much stricter by FY2027, increasing compliance costs--especially for cement and aluminum companies--according to an ICRA ESG analysis.
The study looked at 14 major companies (10 cement and 4 aluminum) and found that while FY2026 will be a relatively manageable transition year, FY2027 will bring tighter rules and higher financial risks if companies don't reduce emissions fast enough.
In FY2026, cement companies can mostly meet targets if they reduce emission intensity by about 1.5%. But if emissions stay the same or increase, companies could face shortfalls, forcing them to buy carbon credits. Some firms may still benefit by cutting emissions early and selling surplus credits.
By FY2027, the situation becomes tougher. Around 30% of cement companies could face deficits even under favorable conditions. In worse scenarios, the financial impact could reach up to Rs 700 crore, and carbon costs could cut profits by as much as 19% for some firms. To stay on track, companies need to reduce emission intensity by roughly 0.7% in FY2026 and 2.7% in FY2027 compared to FY2024 levels.
Aluminum companies start with better efficiency, but rising production will increase pressure. In FY2026, larger firms may already need carbon credits, while smaller firms benefit from efficiency improvements. By FY2027, stricter targets could widen the gap further, with carbon costs reaching up to 3% of profits for some players. To meet targets, aluminum firms may need to cut emission intensity by 1.6% in FY2026 and 5.2% in FY2027.
If companies continue at current emission levels while production grows, none are likely to meet targets. The report highlights that steady emission reductions of 1-3% for cement and 2-5% for aluminum will be essential to control costs and stay competitive.
In short, 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.
— ANI
Reader Comments
Finally India is taking climate action seriously! But 19% profit hit is massive for cement companies. They should invest in renewable energy and green tech now rather than paying penalties later. Smart companies will turn this into opportunity.
India needs to balance development with environment. These heavy industries are backbone of our infrastructure growth. Strict rules are fine but government should also provide subsidies for green technology adoption. Can't just impose costs without support.
Good to see ICRA ESG doing such detailed analysis! India's industrial sector needs these nudges. FY2027 seems far but for long-term investments, companies must act now. Small firms that are efficient will benefit, which is fair.
Honestly, these targets are too aggressive for Indian companies still struggling with costs. Developed countries had decades to pollute freely, now they want us to jump straight to tough standards. Need differentiated targets for developing nations.
Climate change is real and we can't ignore it. These regulations will force innovation. Indian cement and aluminium companies are already efficient in many ways. They will adapt. Look how Tata and Ultratech are already investing in green tech!
The 1-3% reduction for cement and 2-5% for aluminium seems achievable if companies prioritize. But will small players survive? We might see consolidation
We welcome thoughtful discussions from our readers. Please keep comments respectful and on-topic.