Introduction

Climate markets were once peripheral policy tools. Today, they are becoming one of the most powerful economies, shaping global trade, corporate strategy and state behaviour. Climate markets have gained in importance as essential tools for global emissions mitigation, with the carbon credit market valued at $ 414 .8 billion in 2023, and projected to reach $ 1602.7 billion by 2028 at 31% CAGR, driven by corporate net zero strategies and regulatory pressure like the EU’s Carbon Border Adjustment Mechanism.

By 2025, India’s carbon credit market alone was estimated to be around USD 4.17 billion, driven by the gradual operationalisation of the carbon credit trading scheme and the rapid growth of renewable energy projects feeding into offset generation. The shift of a fragmented space towards a compliance-driven market is structurally important because once carbon becomes tradable at a scale, it stops being merely an environmental tool and starts behaving like any other market, which is susceptible to concentration strategy, behaviour, cartelisation and abuse of dominance, which adversely affects the competition in the market.

At the same time, India’s renewable energy sector has witnessed unprecedented auction activity with projects worth over 2 lakh Crore being allocated in recent years. However, these are increasingly dominated by a small group of large players who consistently capture a disproportionate share of winning bids with top funds, snagging 70% of bids.

The risk is that carbon markets, instead of functioning as neutral climate instruments, may evolve into strategically controlled markets where dominant firms can shape entry conditions and pricing behaviour. This concern is not speculative. International experience from the EU Emissions Trading System shows that even regulated carbon markets are vulnerable to collusion, coordinated trading strategies, and artificial price inflation.  

Climate markets in India replicate the dynamics of platform economies rather than conventional commodity markets, leading to concentration, algorithmic coordination, and durable market power that escapes antitrust scrutiny on ground of sustainability. This article analyses the emerging competition law challenges in India’s climate market, with a particular focus on carbon trading, cartelization, leveraging, and abuse of dominance, and argues that climate markets require a more nuanced application of antitrust principles and scrutiny by the CCI.

Market Concentration in Renewable Energy & Carbon Supply

The competitive risks in India’s climate markets are no longer theoretical; they are already visible in concrete market developments. As per Sec 4 of the Competition Act, 2002, a firm is considered dominant when it possesses sufficient economic power to operate independently of competitive pressures or to influence market conditions in its favour. Being a dominant firm is not illegal; however, abuse of a dominant position is per se illegal. 

A fundamental difficulty in climate markets lies in defining the relevant market. Before assessing market power, competition law requires defining the relevant market, that is, identifying the specific product and geographic space within which firms compete. In the M/S Ess Cee Securities Pvt. Ltd v. M/S Dlf Universal Limited (M/S Ess Cee), CCI defined the relevant market in narrow manner. Traditional tests like the SSNIP test which rely on substitutability and consumer choice are not suited to carbon credit and green instruments because these are not ordinary commodities but are regulatory compliance, token policy tools and financial assets rolled into one. 

Demand in such markets is driven primarily by statutory mandates such as GEI targets or sector-specific eligibility rules, not by voluntary substitution based on price. As a result, firms cannot freely switch between different categories of credits or technologies. In such regulatory & evolving markets, even where price changes occur, defining the market either expansively (by treating all credits as substitutable) or restrictively (by isolating hyper-specific compliance segments) can distort the competitive assessment, allowing firms with substantial control over regulatory silos to escape scrutiny under Sections 4 and 6 of the Competition Act.

In MCX v. NSE, 2009 the Supreme Court upheld a narrow platform-based market definition due to regulatory lock-in and network effects. In Google LLC v. CCI, 2023 NCLAT accepted ecosystem-based markets shaped by non-price constraints. In the case of climate markets these precedents imply that CCI cannot treat “carbon credits” or “emissions reductions” as broad homogeneous markets. Instead, markets must be defined around regulatory silos such as “CCTS-compliant carbon credits for the power sector” or “GEO-eligible green hydrogen supply”, where participation is legally constrained. If CCI adopts overbroad market definitions based on notional substitutability, dominance may be artificially dissolved, allowing firms with significant control over specific compliance segments to escape scrutiny under Sections 4 and 6. 

The relative nascency of climate markets cannot operate as a legal shield against competition law scrutiny. In Google LLC v. CCI, 2023 the Supreme Court rejected the argument that digital markets should be left unregulated merely because they were evolving, holding that competition law must intervene precisely at formative stages to prevent irreversible market tipping. Similarly, in MCX Stock Exchange v. NSE, the Court imposed liability despite the currency derivatives market being new. Applied to climate markets, this implies that the developmental status of carbon trading cannot justify regulatory inaction.

There are several examples which reveal three recurring competition traps in India’s climate economy. First, renewable energy auctions show strong tendencies towards bid concentration, where a small group of players repeatedly dominate allocations. Second, large integrated firms in solar and EV markets are approaching levels of market power that raise serious concerns under abuse of dominance principles. Third, carbon trading platforms exhibit price volatility patterns that could enable manipulation and coordinated trading strategies.

A prominent illustration is Adani’s acquisition of Sustainable Energy, which was approved by the Competition Commission of India in 2023. Through this transaction, Adani significantly expanded its renewable portfolio, acquiring nearly 2 GW of solar capacity and strengthening its position in the solar generation market to an estimated 18 per cent share. This consolidation becomes more significant when read alongside auction data from the SEC-I renewable energy tenders, where the top three firms collectively secured around 65 per cent of project allocations in 2024. While the CCI cleared the acquisition under merger control, the broader implication is that a small set of firms is increasingly controlling both generation capacity and future carbon credit potential. When a few firms repeatedly win long-term generation contracts, they also gain indirect control over future carbon credit supply, grid access, and price-setting power in related markets. 

Renewable dominance translates into carbon market power because carbon credit supply is functionally derivative of generation capacity under CCTS design. In economic terms, the renewable sector is beginning to exhibit characteristics of an oligopolistic market, even before the carbon trading system has fully stabilised. Carbon trading platforms and credit registries increasingly resemble essential facilities. Access to them is indispensable for regulatory compliance and market participation. Denial or distortion of access by dominant players could, in future, trigger the essential facilities doctrine.

Further, when certain forms secure upstream, advantages and simultaneously control downstream supply chains, the result is foreclosure through ecosystem control, leading to leveraging. When few firms accumulate surplus credits through early compliance and then hold or flirt the market, they are engaging in exclusionary conduct. As held by Supreme Court in Coal India Ltd. v. CCI, when few firms impose the restrictions on supply of essential raw materials required for production, then it amounts to abuse of dominance. In DLF. v. Belaire and Google Android, where control over critical market infrastructure was sufficient to establish abuse, even without predatory pricing. Similarly, in climate markets, control over carbon credit registries, trading platforms, grid access, or certification mechanisms can function as infrastructural choke points. Where a dominant renewable or integrated energy firm leverages such control to influence access, pricing, or trading conditions, the abuse lies not in below-cost pricing but in exclusionary ecosystem control under Section 4(2)(c) and 4(2)(e) of the Competition Act.

Dominant firms such as Tata Steel, which holds approximately 25% market share are in a position to accumulate credits and use them to reduce compliance cost by 15 to 20% compared to competitors. In thin and policy-driven markets like carbon trading, a small set of dominant firms often possess superior access to real-time data, forecasting models, and automated bidding systems. This can create algorithmic collusion, where it is not needed to have express agreements but it can be achieved through coordinated conduct & behaviour. The access to data and size of enterprises leads to reinforcement of market power by enterprise as held in In Re: Delhi Vyapar Mahasangh and Flipkart Internet Private Limited.

Concentration is also visible in India’s Green hydrogen sector under the 2025 SIGHT programme. Reliance & Adani together secured around 80% of the total 4GW electrolyser capacity. These firms were awarded contracts at prices approximately 12% higher than those offered by smaller competitors after securing the tender gain control over nearly 90% of relevant supply chains. This resulted in an increase of around 25% in equipment prices for other market participants. Control by a few certain firms can create entry barriers for smaller players and create an ecosystem lock-in effect. According to the energy sector assessment, this level of concentration may slow progress towards India target of producing 5 million metric turns of green hydrogen annually as smaller firms exit the market due to unviable cost structures. Such conduct reflects classic indicators of market dominance, including the ability to influence prices and restrict access to essential inputs.

Further, there are continuous evolutions going on in the technologies used behind climate markets. Superior technology is considered an indicator of dominance in the market by the CCI in Shri Shamsher Kataria v. Honda Siel Cars India Ltd. Other factors of creating dominance include the economic power of the enterprise, including commercial advantages over competitors, and the market structure in size of market. Thus, it can be said that there are potential flags of dominance and abuse in this developing market, which needs the scrutiny of CCI in possible cases in future. 

Leveraging, Cartelisation & Ecosystem Control in Climate Markets 

Cartelisation refers to coordinated conduct among competitors, such as price-fixing or bid-rigging, that replaces independent market rivalry with collective control. Carbon credits are highly sensitive to information, price and stability that arises due to unequal access to market data, strategic trading practices or coordinated behaviour among major participants. India’s Carbon Credit Trading Scheme (CCTS), which began pilot operation in 2025 has shown significant volatility in its early stages. Voluntary offset rates on platforms such as IEX and PXIL recorded price fluctuation ranging between 12% and 20%. Market data suggest that a small group of top traders linked to 3 or 4 large energy companies accounted for nearly 60% of total trading volume. This high level of concentration in a market with limited liquidity increases the risk of adverse competition behaviour practices similar to flash trading have been reported, where dominant participants exploit thin markets to temporarily push prices up and then exit positions, which allows a few players to influence prices, distorting competition in the market.

The phased implementation of the CCTS has also created competitive imbalances across sectors. By November 2025, only four sectors: aluminium, cement, chlor-alkali, and pulp and paper were assigned final Greenhouse Gas Emission Intensity (GEI) targets, which excluded major sectors such as steel and petrochemicals in the initial phase. The selective rollout creates some risk of market distortion as the firms in early covered sectors that outperformed their targets can generate surplus carbon credits and sell them at low prices.

Bridge to India warns that this phased sectoral coverage allows incumbents to lock in early advantages, create barriers in market entry by smaller firms and distort price signals in a market that crossed USD 4 billion value in 2025. Smaller participants are priced out not through explicit exclusion but through economic irrationality of participation, which amounts to constructive denial of market access under Section 4(2)(c) of the Competition Act, 2002. In MCX v. NSE, the Supreme Court held that platform control over liquidity and access can itself amount to abusive conduct, irrespective of formal price levels. 

Sec 19(3) of the Act allows the CCI to examine barriers to entry and foreclosure effects arising from market structure. In Vodafone Idea v. CCI, the commission held that sectorial frameworks are not immune where incumbents leverage regulatory sequencing to establish dominance. Strategic exploitation of phased implementation of CCTS, where timing advantages are converted into durable market power fit within this doctrine of regulatory gaming.  

Another emerging risk arises from the transition of Renewable Energy Certificates (RECs) into carbon credit instruments under the CCTS framework. In 2025, leading renewable developers such as Adani Green and ReNew Energy secured nearly 70 per cent of capacity in hybrid renewable tenders. Complaints were raised regarding possible bid rotation in SEC-II auctions, as bidding data showed that price differences between top bidders narrowed by around 10 per cent in rounds dominated by three major firms. Bid rotation and collusive behaviour in green auction fall within Sec 3(3)(d) of the Act, which creates a statutory presumption of AAEC in cases of bid rigging.

The Supreme Court affirmed in Builders Association of India v. Cement Manufacturers, 2011, that cartelisation can be inferred purely from economic patterns, such as price, parallelism, capacity utilisation and bid clustering, even in the absence of direct evidence of agreement. Further, in Excel Crop Care v. CCI, 2017, the court recognised that circumstantial and econometric evidence is sufficient to establish collusion. In the case of climate markets, where algorithmic building thin liquidity and repeated dominance by the same firms generate price convergence and abnormal bit compression. The threshold required for cartel scrutiny is easily established.

The ESG objectives do not operate as a legal defence under competition law. In CCI v. SAIL, 2010, the Supreme Court held that public interest cannot legitimise anti-competitive conduct. Many climate initiatives necessarily involve cooperation between competitors, including shared emissions databases, common certifications, or joint technology platforms. Yet competition law lacks a rule of reason framework comparable to Art 101(3) TFEU, which explicitly allows efficiency and enhancing agreements. Sec 19(3)(f), which permits consideration of public interest, has never been operationalised by CCI in a way that accommodates environmental benefits. Consequently, even pro-competitive sustainability collaborations risk falling within the shadow of anti-competitive agreements, producing AAEC that discourages collective climate action in the market.

Conclusion 

Anti-competitive behaviour in climate markets causes a form of harm that is qualitatively different from ordinary competition law violations. It not only affects consumers but also affects the environmental purpose for which these markets exist. Climate markets are not merely policy instruments but constitute regulated financial and commodity markets. Once carbon credits are treated as marketable assets, exchanges as platforms and certain firms as ecosystem controllers, the principles of Indian competition law apply. Distortion in climate markets is not a regulatory accident but legally cognizable abuses of dominance, cartelisation and leveraging for which the CCI already possesses sufficient doctrine tools without any new climate-specific legislation.

The factors listed under Sec 19(4) for assessing dominance are purely economic, focusing on market, share, financial resources and entry barriers. As a result, conduct that may be economically efficient in the short-term can still be distortionary, which may escape from scrutiny by CCI if justified on the basis of efficiency-enhancing agreement.

International competition authorities have already begun adapting antitrust doctrine towards sustainability markets like the European Commission’s Horizontal Guidelines and the UK’s CMA Green agreement, guidance, which explicitly recognise sustainability collaboration and algorithmic market risks. However, the absence of clear guidance from the CCI risk climate collaboration is being over enforced as, while genuinely harmful conduct and carbon and green market risk are being under-enforced. 

At a time when climate markets are becoming Central to the economy and industrial policy, India should not be behind in the regulatory gap created in this area. Unless the CCI reconceptualises climate markets as regulated platform ecosystems rather than conventional commodity markets, competition law will systematically legitimise oligopoly in the name of sustainability. About the Authors

Shivam Singh and Priyanshi Jain are 4th Year Law Students at Dharmashastra National Law University, Jabalpur.