'Carbon now emerging as major business, trade & credit risk factor for Indian industry'

Mumbai: Carbon emissions are no longer confined to sustainability reporting and environmental compliance alone, but are rapidly emerging as a major business cost, export competitiveness factor and credit-risk variable for Indian companies, according to a new report released by Rubix Data Sciences in collaboration with Breathe ESG.

The report, titled “Carbon as a Business Variable: Trade, Risk, and the Evolution of India’s Carbon Market”, comes at a crucial time as India prepares to operationalise its domestic carbon market framework in 2026 amid tightening global climate-linked trade regulations.

The study notes that mechanisms such as the European Union’s Carbon Border Adjustment Mechanism (CBAM) are increasingly exerting pressure on export-oriented Indian industries including steel, aluminium, cement and fertilisers by effectively converting carbon emissions into a direct trade and cost factor.

As one of the world’s fastest-growing major economies, India’s approach towards balancing industrial growth with climate commitments and sustainability goals will be closely watched globally, the report stated.

According to the findings, carbon exposure is gradually beginning to influence business fundamentals such as profitability, operational costs, capital allocation, supply-chain decisions and even credit-risk assessments by lenders and insurers.

Co-founder and Chief Executive Officer of Rubix Data Sciences Mohan Ramaswamy said carbon risk was no longer restricted to a company’s direct emissions, but increasingly extended deep into supply chains, financing networks and export dependencies.

“A large portion of carbon-related risk may not sit within a company’s own operations but within its supply chain ecosystem. Businesses that currently view carbon only from the perspective of regulatory compliance may eventually discover that their vulnerabilities arise indirectly through suppliers, financing relationships and global trade exposure,” Ramaswamy said.

He added that as international markets increasingly link carbon intensity with pricing, procurement decisions, financing access and market competitiveness, business strategies and investment behaviour are also beginning to evolve accordingly.

“India is now entering a phase where carbon is gradually becoming directly linked with competitiveness, supplier evaluation and long-term commercial viability,” he said.

The report also underlined the growing role of regulators such as the Reserve Bank of India (RBI) and the Securities and Exchange Board of India (SEBI) in pushing financial institutions and corporates towards deeper integration of carbon disclosures and Environmental, Social and Governance (ESG) considerations.

India has already emerged as one of the world’s significant voluntary carbon markets, with more than 375 million carbon credits issued between 2010 and 2025. However, the report observed that much of the economic value generated through these credits has largely accrued outside the country, with limited integration into India’s own emissions reduction priorities.

The proposed Carbon Credit Trading Scheme (CCTS) and the broader Indian Carbon Market framework are expected to address this imbalance by helping retain both economic and environmental value within the domestic system.

The report, however, flagged several execution challenges within India’s emerging carbon ecosystem. Rubix’s analysis of over 1,100 Verra-certified Indian carbon projects revealed that only around one-third successfully reached the registration stage, with many projects facing delays due to verification complexities, monitoring costs and regulatory uncertainty.

According to the study, such delays could directly affect project monetisation, investor confidence and the long-term credibility of India’s carbon market architecture.

The report further warned that climate-linked regulations are rapidly reshaping the economics of global trade and finance. Carbon efficiency, it noted, is increasingly becoming a determinant of pricing power, export competitiveness and market access rather than merely a sustainability metric.

Rubix also highlighted that lenders, insurers and rating agencies are beginning to view carbon and energy exposure as important financial risk indicators. As climate disclosure norms tighten globally, financial institutions may increasingly integrate carbon exposure into credit evaluation, underwriting practices and portfolio-risk assessments.