The Indian government has approved a detailed offset mechanism for eight sectors, including renewable energy and green hydrogen production, enabling entities to earn carbon credits for verified emission reductions. This move supports voluntary climate action and incentivises projects aimed at reducing greenhouse gas emissions.

An offset mechanism allows businesses to compensate for their emissions by investing in initiatives that cut, remove, or avoid emissions elsewhere. The government’s approval marks a significant step in operationalising the "Offset Mechanism under ICM [Indian Carbon Market]," as stated by the Ministry of Power.

The newly approved methodologies are expected to broaden the scope of climate-friendly projects, helping India tap into emission reductions beyond the compliance sector. This development enhances India’s carbon trading ecosystem, fostering climate action across industries while driving investments in renewable and sustainable technologies. 

Introduced in June 2023, the Carbon Credit Trading Scheme laid the foundation for the Indian carbon market. It was later amended in December 2023 to allow non-obligated entities to participate in voluntary climate mitigation efforts.