India and the European Union (EU) have drawn up a dedicated work plan under the proposed Free Trade Agreement (FTA) to address concerns arising from the EU's Carbon Border Adjustment Mechanism (CBAM), with a focus on ensuring that Indian exporters, especially small and medium enterprises (SMEs), do not face compliance hurdles.
Speaking at the Indo-German Chamber of Commerce (IGCC) Industry Dialogue 2026 on Thursday, Darpan Jain, Additional Secretary in the Department of Commerce and India's chief negotiator for the FTA, said the proposed trade pact contains a separate annexure dealing exclusively with CBAM-related issues.
"CBAM compliances are a concern among SMEs in terms of verification, determining the value of embedded carbon and ensuring that verifiers are recognised by EU authorities. There are separate provisions under the agreement to address these issues. We also have a provision to engage with EU authorities on taking into account the carbon price paid in India," Jain said.
He said both sides have prepared a comprehensive framework to help Indian industry comply with the EU's carbon-related import rules while safeguarding commercial interests.
The EU's CBAM, which became effective in January 2026, imposes a carbon price on imports of carbon-intensive goods such as steel, aluminium and cement.
Acknowledging the challenges posed by the mechanism, Jain said the annexure includes provisions covering verification processes, calculation of embedded carbon emissions and engagement with EU authorities to ease compliance for smaller exporters.
"I am very hopeful that SMEs will not face any problems," he said.
Jain added that discussions are also underway on India's emerging carbon pricing framework to ensure that domestic carbon costs can potentially be offset against CBAM liabilities in Europe.
"As you know, India is also developing its own carbon pricing mechanism. So, how to offset what is paid in India from what is paid in Europe is also part of the discussions," he said.