India is seeking a clearer pathway for its domestic carbon-pricing system to be considered under the European Union’s Carbon Border Adjustment Mechanism (CBAM), as discussions between Indian officials and the European Commission address emissions monitoring, verification and the treatment of carbon costs on traded goods.
On 12 October 2026, India’s Power Secretary Pankaj Agarwal met Gerassimos Thomas, the European Commission’s director-general for taxation and customs, in New Delhi. Discussions covered India’s developing carbon market, implementation of EU CBAM, monitoring, reporting and verification (MRV) systems, and the potential recognition of domestic carbon-pricing mechanisms.
No formal agreement recognising India’s carbon-pricing system under EU CBAM emerged from the meeting. Indian exporters therefore cannot assume that carbon costs incurred under domestic arrangements will automatically qualify for deductions from their European CBAM liabilities.
India’s carbon market and power capacity
During the discussions, India reported that emissions-intensity reduction targets under its Carbon Credit Trading Scheme (CCTS) cover 490 industrial units. The country also highlighted 308 GW of non-fossil power capacity, out of total installed electricity generation capacity of 558 GW.
The technical dialogue provides a channel for examining how India’s developing carbon market and emissions-monitoring infrastructure could relate to EU CBAM requirements. For exporters, the commercial relevance depends on whether domestic carbon-pricing arrangements can be supported by evidence acceptable under the European framework.
The existence of a national carbon market alone does not establish eligibility for CBAM relief. Exporters must be able to demonstrate that a qualifying carbon price was effectively paid on emissions embedded in the goods entering the EU.
Carbon-price deductions depend on verifiable payments
Determining whether domestic carbon costs qualify for recognition requires evidence covering the payment made, the emissions to which it applies, the treatment of free allocation and any rebates or other forms of compensation. The relationship between the carbon price and the specific exported product is also relevant.
These requirements place emissions data and verification arrangements at the centre of any potential relief mechanism. Indian producers would need to connect their domestic carbon costs to installation-level emissions and the products supplied to European customers.
For EU importers, the outcome could affect supplier comparisons. A producer with a higher mill price but an eligible and documented domestic carbon payment could become more competitive after the CBAM adjustment than a lower-priced supplier whose emissions do not qualify for a carbon-price deduction.
Steel and aluminium exporters face potential changes
India’s carbon-pricing discussions are particularly relevant to steel and aluminium, sectors in which the country is a major exporter to international markets. The potential expansion of EU CBAM to additional downstream products from 2028, if the relevant legislation is adopted, could also widen the range of Indian manufactured goods exposed to the mechanism.
For producers supplying these markets, the interaction between domestic carbon pricing, emissions verification and EU import requirements could become increasingly important to export costs. Any benefit would depend on the final regulatory treatment and the ability to substantiate eligible payments against the emissions associated with exported goods.
The talks also reflect the broader effort by third countries to connect domestic climate policies with the requirements of carbon-border measures. The practical value of such arrangements depends on whether the relevant carbon costs and emissions records can be demonstrated under the importing jurisdiction’s rules.
UK recognition offers a separate regional reference point
Serbia and Montenegro provide a regional comparison through the United Kingdom’s CBAM framework. Both countries are listed by the UK as jurisdictions with carbon-pricing systems that may qualify for relief, subject to the applicable evidence and eligibility requirements.
The UK arrangements do not determine how the EU will treat India’s carbon-pricing system. The two jurisdictions operate under separate legal frameworks, and recognition under one does not establish entitlement to relief under the other.
For Indian exporters, the central issue remains whether the country’s Carbon Credit Trading Scheme, MRV arrangements and verification infrastructure can provide sufficiently precise evidence of the effective carbon cost associated with a tonne of steel or aluminium entering the European market.
