European Union negotiators have not offered any carve-outs to India from the bloc’s carbon border levy during trade negotiations, but have committed to extend automatically to Indian exporters any relaxations the 27-member bloc grants to other countries under the mechanism, according to an official familiar with the discussions.The assurance relates to the Carbon Border Adjustment Mechanism, the EU’s flagship climate policy tool that places a carbon price on imports of emissions-intensive goods such as steel, aluminium, cement, fertilisers, electricity and hydrogen. While New Delhi had sought explicit concessions, particularly for developing economies, Brussels has held firm on maintaining a uniform framework tied to its climate targets.
Officials involved in the talks said the EU’s position is rooted in its legal architecture, which limits the scope for country-specific exemptions. Instead, the bloc has offered a form of parity, signalling that any flexibility introduced in CBAM rules for third countries would apply equally to Indian exporters without the need for fresh negotiations. This includes possible adjustments to timelines, reporting requirements or recognition of equivalent carbon pricing regimes.
The clarification comes as India and the EU intensify efforts to conclude a long-pending trade pact that covers goods, services, investment and regulatory cooperation. Carbon costs have emerged as one of the most sensitive issues, with Indian industry warning that CBAM could erode export competitiveness, especially for small and medium-sized producers that lack the capital to invest quickly in low-carbon technologies.
CBAM is designed to prevent “carbon leakage”, where production shifts to jurisdictions with looser climate rules. Importers into the EU are required to purchase certificates reflecting the embedded emissions in covered products, aligned with the price paid by EU producers under the bloc’s emissions trading system. The transitional phase, which began in October 2023, currently focuses on reporting obligations, with full financial liability scheduled to take effect from 2026.
Trade officials said India has consistently argued that the mechanism risks acting as a trade barrier disguised as a climate measure, particularly given historical emissions disparities between developed and developing economies. New Delhi has pressed for recognition of its domestic mitigation efforts, including renewable energy expansion and efficiency standards, as well as longer adjustment periods.
The EU, however, has maintained that CBAM is non-discriminatory and compatible with global trade rules, as it mirrors obligations faced by European producers. While acknowledging the concerns of developing partners, Brussels has preferred multilateral solutions, including dialogue on climate finance and technology transfer, rather than bilateral exemptions within trade agreements.
Industry representatives in India said the commitment to automatic extension of any future relaxations offers some comfort but falls short of the certainty exporters had hoped for. Steel and aluminium producers, in particular, are closely watching discussions within the EU on simplifying compliance for smaller suppliers and refining emissions calculation methodologies, which could lower administrative burdens.
Analysts note that the EU is under pressure from multiple trading partners over CBAM, with countries in Asia, Africa and Latin America raising similar objections. Any adjustments made to address these concerns would likely have broader implications, reinforcing the significance of the EU’s assurance to India on equal treatment.
Within the trade talks, CBAM is only one of several complex dossiers. Negotiators are also grappling with market access for automobiles and agricultural products, data protection, intellectual property and sustainable development commitments. The carbon levy, however, has become emblematic of the tension between climate ambition and trade liberalisation.
Officials indicated that India continues to reserve its rights to challenge CBAM at the World Trade Organization if it believes the measure violates global trade norms. At the same time, there is recognition that exporters must prepare for a future where carbon intensity increasingly shapes market access, particularly in developed economies.