India needs to strengthen its carbon-pricing framework and emissions-tracking systems to protect the competitiveness of exporters as the European Union’s Carbon Border Adjustment Mechanism (CBAM) enters its definitive phase, according to a joint report by the Confederation of Indian Industry (CII) and IIM Ahmedabad.
The report calls for a credible domestic carbon-pricing system supported by robust measurement, reporting and verification (MRV) mechanisms. Such a framework would create an auditable record of carbon costs paid by individual entities, allowing Indian exporters to demonstrate compliance and potentially claim valid deductions under CBAM.
The EU’s CBAM entered its definitive phase on January 1, 2026, requiring importers of carbon-intensive goods to account for the embedded emissions in their products. The requirements are particularly relevant for Indian industries such as steel, cement, aluminium, fertilisers, refining and petrochemicals.
The CII-IIM report noted that simply paying a domestic carbon price will not automatically reduce the CBAM liability. Exporters must be able to provide evidence that the carbon cost was actually paid, while emissions data must be accurately measured and independently verified.
The report also stressed the need for stronger verification standards in India’s carbon market. Facility-level emissions data should be independently verified to ensure that carbon credits represent genuine and permanent emissions reductions.
With European buyers facing increasing pressure to account for the carbon intensity of imported products, the report said stronger domestic carbon accounting and pricing mechanisms will be essential for Indian companies to remain competitive in the EU market.