India and the European Union have incorporated a dedicated framework within their proposed Free Trade Agreement (FTA) to address concerns related to the EU’s Carbon Border Adjustment Mechanism (CBAM), according to a senior commerce official. The framework is designed to facilitate cooperation on carbon-related trade measures while helping Indian exporters adapt to the EU’s evolving environmental regulations.
The CBAM, which will gradually impose carbon-based charges on imports of emissions-intensive products such as steel, aluminium, cement, fertilizers, hydrogen, and electricity, has been a key issue during the India-EU trade negotiations. Indian industries have expressed concerns that the mechanism could increase export costs and reduce the competitiveness of domestic manufacturers in the European market.
The dedicated framework under the FTA is expected to promote dialogue, technical cooperation, and information sharing on carbon accounting, emissions reporting, and compliance requirements. It will also provide a structured platform for addressing implementation challenges and exploring measures to reduce the impact of CBAM on bilateral trade.
India has consistently maintained that climate-related trade measures should not become barriers to market access and has urged developed economies to consider the developmental needs of emerging markets. The inclusion of the CBAM framework reflects both sides’ efforts to balance sustainability objectives with trade facilitation as they move closer to concluding the long-awaited FTA negotiations.
The proposed arrangement is expected to provide greater regulatory certainty for exporters, strengthen bilateral economic cooperation, and support the continued expansion of India-EU trade while encouraging the transition toward lower-carbon manufacturing practices.