Delhi’s EV Policy 2.0: Addressing Carbon Credit Challenges and Identifying Key Beneficiaries

Sustainable urban mobility has become a growing priority across Indian states, driving progressive policy initiatives to accelerate electric vehicle (EV) adoption. As cities worldwide work to curb emissions, Delhi has taken a pioneering step by proposing carbon credit for EV buyers under its Draft EV Policy 2.0. The city’s first EV Policy, introduced in 2020, focused on reducing vehicular emissions, promoting clean transport, and strengthening EV infrastructure through financial incentives, scrappage benefits, and clear adoption targets across segments.

These efforts have contributed to a steady rise in EV sales across multiple vehicle categories. EV penetration in Delhi maintained an upward trend from FY2023 to FY2025, with a slight moderation in FY2025—reflecting evolving consumer preferences and potential anticipation of upcoming policy changes. Overall, the trajectory signals growing acceptance and deepening market maturity for EVs in the capital.

Figure: 1- Delhi’s EV Adoption (FY2023 – FY2025)

Source: Vahan Dashboard, JMK Research

To further incentivize EV adoption and promote emission reduction, carbon credits have been proposed as a potential mechanism to reward EV owners for the environmental benefits they contribute.

How Carbon credits work for EV Owners:
The proposed policy introduces a mechanism for calculating carbon credits based on CO₂ emissions avoided by using an EV instead of a conventional internal combustion engine (ICE) vehicle.

  • Carbon credit value in India: INR100 to INR 800 per tonne[1] of CO₂
  • Annual CO₂ savings per EV: ~0.5 to 2 tonnes[2]
  • Resulting annual incentive: INR 200 to INR1,600[3] for the typical EV owner

Figure: 2- Carbon credit and incentive calculation process

Source: JMK Research, Niti Ayog
Note:  Assumptions Used: Annual usage: 15,000 km, ICE emission factor: 179.94 g/km (IPCC/MoEFCC), EV battery use over life: 2,400 kWh, Grid emission factor: 720 g/kWh (CEA, India), Vehicle lifecycle: 12. Year

While the carbon credit proposal under Delhi’s Draft EV Policy 2.0 broadly targets EV buyers, its structure is particularly beneficial for fleet operators and corporates committed to net-zero goals.

  • High-usage fleets—such as those operated by logistics companies, ride-hailing services, and last-mile delivery providers—generate significantly more CO₂ savings due to their higher annual mileage, translating into greater carbon credit earnings.
  • Corporates with net-zero targets may leverage this initiative not only to reduce their operational emissions but also to earn tradable carbon credit, which can offset emissions from other parts of their business or be monetized.

While Delhi’s carbon credit proposal is forward-looking, its success depends on overcoming key challenges:

  • Establishing a robust MRV (Measurement, Reporting & Verification) system must ensure accurate lifecycle emission assessment, transparent pricing, and emission tracking across vehicle types and charging sources.
  • Low stakeholder awareness may limit short-term impact.

Addressing these gaps is crucial to unlocking the full potential of carbon credit as an effective incentive.
That said, the initiative marks a significant step toward linking clean mobility with market-based climate action. With proper alignment to national carbon frameworks, clear governance, and a user-friendly approach, the policy can become a catalyst for EV adoption. It also opens new value streams for fleet operators and corporates pursuing net-zero goals, positioning supporting the use of carbon markets for sustainable transport solutions.

1,2,3 Complexities cloud Delhi’s plan to give carbon credits to EV buyers