Free Trade Agreement Between India and the EU: Mitigating CBAM Impacts Through Recognition of National CO₂ Prices
CBAM Weekly – Issue 80
A landmark agreement with global significance
India and the European Union concluded a comprehensive free trade agreement during the 16th India EU Summit. It grants preferential access to the EU single market for over 99 percent of Indian exports and reduces tariffs in key export sectors. The agreement marks a strategic milestone in India trade policy. It deepens economic integration with one of the world most important trading areas and creates new opportunities for exporters, industry, and service providers.
CBAM remains applicable to Indian exports
Despite the tariff reductions under the agreement, the applicability of the Carbon Border Adjustment Mechanism remains unchanged. Indian exports in emissions intensive areas such as steel, aluminium, cement, and fertilisers will continue to be subject to CBAM requirements. Indian companies will still need to report embedded emissions and, from 2026, purchase CBAM certificates in line with the EU emissions price. It should also be noted that the Indian default values are relatively high.
Recognition of national CO₂ pricing systems secured
A key concern for India in the negotiations was therefore the recognition of a domestic CO₂ price in the CBAM calculation. The EU has now committed to enter into a structured dialogue with India on the recognition of national CO₂ pricing systems. If India introduces its own CO₂ pricing system that meets EU requirements in terms of coverage and methodology, the CO₂ costs paid domestically can in future be credited against the CBAM obligation. This commitment is a diplomatic success for India and creates, for the first time, an option to avoid double burdens under CBAM.
Technical cooperation and support pledged
The free trade agreement also includes an arrangement on technical cooperation for emissions data collection, recognition of verification bodies, and harmonisation of reporting standards. In addition, financial and technical support is предусмотрено for Indian companies. Small and medium sized enterprises in particular are intended to be enabled to implement CBAM requirements.
What companies should consider now
From 2026, the regular CBAM phase begins. For affected imports, verified emissions data must then be used and the corresponding certificates must be purchased. Through the recognition of national CO₂ prices, significant cost advantages could arise, provided India establishes a corresponding system and the EU officially recognises it. For companies, this means that internal processes for emissions data collection as well as close collaboration with suppliers in third countries must be set up early. Regulatory clarity on the exact requirements for crediting CO2 prices is still lacking. The European Commission has not yet published the corresponding implementing regulation.
CBAM as part of cooperative trade policy
This agreement is the first of its kind to explicitly integrate CBAM relevant provisions into a trade agreement with an emerging economy. It shows that EU climate policy does not have to be at odds with trade policy. India is taking a pragmatic path with this approach. Instead of seeking legal or political confrontation, a framework for cooperation has been created that enables fair solutions. The agreement can serve as a model for other emerging economies that seek fair recognition of their climate measures in international trade.
Support with implementation
If your company is affected by CBAM or if you would like to assess the impacts of the India EU agreement on your supply chains and your emissions reporting, we will be happy to support you. Contact us at helge@kolum.earth. We support you in preparing for the carbon border adjustment and help you position your company to be compliant and cost optimised in the long term.