India’s emission trading scheme (ETS), dubbed the Carbon Credit and Trading Scheme (CCTS), passed into legislation last year. CCTS will be an extremely important policy instrument in the path to reach net zero in 2070 because it essentially incentivises industrial entities to reduce emissions. However, experience from other nations, particularly the EU, has shown that designing an effective ETS is a tricky and continuous process. This first-of-a-kind study investigates several crucial questions regarding the role of the ETS in meeting long-term mitigation targets, sectoral interactions under an emissions cap, and the ETS's compatibility with existing energy and climate policies. Using an integrated modelling framework, we provide key insights that will be useful for policymakers designing India’s ETS.