Biomass Pellets to a Thermal Plant: Who Gets the Carbon Credits — You or the Plant?

The only question that decides this: whose chimney?

Carbon credits are not awarded for being useful. They are awarded to whoever's accounts the reduction lands in. Registries call this the project boundary, and it is drawn around physical equipment, not around goodwill or effort.

So draw it. Where, exactly, does the tonne of CO₂ stop existing?

Not in your pellet mill. Your mill emits — diesel in the collection trolleys, grid power for the hammer mill and the die, diesel again on the run to the plant gate. Nothing is saved there. The saving happens at the moment a boiler burns your pellet instead of a tonne of coal, and the coal stays in the ground.

That boiler belongs to the power company. So does the coal it did not buy, the fuel meter that proves it, and the emissions inventory the tonne disappears from. You sold a fuel to a company that made a decision. The decision is where the credit sits.

This is not a technicality anyone can argue around. It is the same rule that stops two parties claiming the same tonne — double counting — which is the single fastest way to have a project rejected or a buyer walk away. If both you and the plant claimed that tonne, one of you would be selling air.

Fine — so the plant gets them?

In principle, yes. The plant would be the project proponent, using a methodology built for exactly this: ACM0006, electricity and heat generation from biomass, is the long-standing route for biomass burnt in a power station.

In practice, in India, in 2026 — mostly no. And the reason is the second rule, which is the one that actually kills this whole idea.

Additionality: the mandate that kills the credit

The Ministry of Power's revised biomass policy — issued 8 October 2021 and modified on 16 June 2023 — mandates biomass co-firing in coal-based thermal power plants: 5% from FY 2024-25, rising to 7% from FY 2025-26. It runs under the SAMARTH mission (Sustainable Agrarian Mission on Use of Agri-Residue in Thermal Power Plants), launched in July 2021 to move crop residue out of the fields and into the boilers.

That mandate is why your business exists. It is also why the carbon credit does not.

There is a narrow gap above the line. NTPC has demonstrated co-firing well beyond the mandate — 20% torrefied biomass at Unit 4 of its Tanda station — and Talwandi Sabo has taken large-scale torrefied pellets. Volume above the compulsory 7% is not legally required, so an additionality case can at least be argued for it.

Note what that gap does not change: it is still the plant's project, in the plant's boundary, on the plant's meters. A wider gap does not move the credit to the fuel supplier's side of the fence.

What the plant actually gets — and why it isn't carbon money

This part matters commercially, because it tells you what the buyer across the table is really optimising for, and therefore what you can and cannot charge for.

Read that table once more before your next price negotiation. Your buyer is buying regulatory compliance. It is buying an RPO number and the absence of a penalty notice. It is not sitting on carbon revenue it is refusing to share with you — because there is none.

Should you write the credits into your supply contract anyway?

Yes. Not because it will pay you next year, but because it costs nothing and it keeps a door open.

Fuel and power contracts in mature markets deal with this through an environmental attributes clause. It defines the whole family of instruments — renewable energy certificates, carbon credits, Carbon Credit Certificates under CCTS, and any similar instrument recognised in future by law or by a registry — and then says explicitly who owns them.

Where a pellet business can genuinely earn carbon money

Here is the part worth acting on. The mandate that blocks the credit at a thermal power plant does not exist anywhere else. Every other coal-burning boiler in India is unregulated on this point — and that is precisely what makes it creditable.

Sell into buyers nobody is forcing

A textile mill, a paper unit, a food processor, a chemical plant, a distillery, a brick kiln — each running a coal or furnace-oil boiler for process steam. No law compels any of them to switch. If they switch to your pellets, that is a genuine change caused by the project, and the additionality argument that fails at the power station succeeds here.

The methodology route is well established: CDM's AMS-III.B (switching fossil fuels) has been used in India for exactly this — one documented fuel-switch project at a chemical plant moved steam generation to biomass briquettes for around 7,250 tCO₂e a year. India's own CCTS offset mechanism list includes industrial fuel switching and biomass-based electricity and heat generation, with a project start date on or after 1 January 2025.

Be the developer, not the vendor

This is the structural shift, and it is the whole point of this article. At a thermal plant you are a fuel vendor and the credit is out of reach. At an industrial boiler you can be the project proponent — if you finance or install the boiler conversion, sign the multi-year fuel agreement, hold the metering, and register the project in your own name.

One factory will not pay for validation and annual verification. A portfolio of twenty similar boilers under one programme will. Aggregation is the business model; it is the same logic that makes an FPO viable in a farm carbon project.

Notice who your customers are

Several of those industrial buyers — textiles, pulp and paper, fertiliser, petrochemicals, cement — are CCTS compliance sectors, with legally binding emission-intensity targets for FY 2025-26 and FY 2026-27 against an FY 2023-24 baseline. Roughly 740 entities are covered.

A mill that misses its intensity target must buy certificates or pay compensation. Switching its boiler fuel improves that number directly. That is a buyer with a statutory reason to pay you more than the calorific value of your pellet is worth — which is exactly what the power station does not have.

And the stubble that would otherwise have been burnt?

It comes up in every conversation, so deal with it plainly: the avoided-burning claim is real but very small, and mostly not yours.

Burning a tonne of straw releases only about 0.08 tCO₂e of the gases that actually count — most of the carbon in that smoke was pulled from the air by the same crop months earlier, so it nets out. And there is a trap in the logic: if you are paying money for that straw, you have proved it was never going to be burnt. Straw with a buyer is straw with value.

We worked the numbers through in detail in carbon credits for stubble and crop residue. The short version: at realistic volumes the annual audit costs more than the claim is worth.

The money that is actually on the table right now

Carbon credits are the wrong thing to chase for a pellet plant supplying thermal power. These are the right things, and they are available today.

The short version

Running a pellet line, or planning one, and want to know where the carbon actually is? Ask for a free eligibility check. We will map your feedstock, your buyers and your contracts against what can genuinely be registered — including when the honest answer is that nothing can.

Current as of August 2026. General information only — not legal, financial or regulatory advice. Policy positions, mandate percentages and subsidy rates change; verify against the current Ministry of Power, MNRE, CPCB and BEE notifications before making an investment decision.