India and the European Union have agreed to set up a technical dialogue to address market access challenges faced by Indian exporters under the EU’s Carbon Border Adjustment Mechanism (CBAM), even as the carbon tax itself remains outside the scope of the free trade agreement (FTA).
Commerce Secretary Rajesh Agrawal said there would be no exemption or relaxation from CBAM for Indian exporters, but both sides had agreed on mechanisms to help industry navigate the regulation.
“There are certain provisions that we have agreed under CBAM. A technical dialogue will be set up to address the pathway for our industries to access the European market despite the CBAM regulation being in place. We will also work together to ensure that CBAM verifiers in India are accredited by EU agencies, enabling our industries to access them more easily,” Agrawal said while addressing the media on Tuesday following the conclusion of India–EU FTA negotiations.
CBAM is the EU’s instrument to place a price on carbon emissions embedded in carbon-intensive goods entering the bloc, with the objective of preventing carbon leakage and encouraging cleaner industrial production in non-EU countries. The mechanism has been in force since January 1.
A commerce ministry statement said India has secured several commitments under the CBAM framework, including a forward-looking most-favoured-nation assurance that would extend any flexibilities granted to third countries, enhanced technical cooperation on recognition of carbon pricing mechanisms and verifiers, as well as financial assistance and targeted support to help Indian industry reduce greenhouse gas emissions and comply with emerging carbon requirements.
“We will also work together to understand the technical processes through which CBAM-related carbon measurements will be carried out in both economies,” Agrawal added.
According to a Grant Thornton Bharat report, India’s iron, steel and aluminium sectors are among the most exposed to CBAM. As of 2024, the EU accounted for 44% of India’s total steel exports—about 3.3 million tonnes—and 26% of aluminium exports, valued at $1.9 billion. These segments, particularly flat-rolled products, tend to have higher embedded emissions than EU benchmarks, making them vulnerable to CBAM-related cost pressures.