With no changes in the EU’s plans of imposing levies on imports of specific carbon intensive products from January 1, 2026 under the Carbon Border Adjustment Mechanism (CBAM), India  is holding discussions with the bloc on areas where mechanisms need to be worked out to meet requirements, officials said.

“With the EU we are discussing areas where we need to work out mechanisms under CBAM. We have set up a carbon trading platform, so what should be the method for carbon pricing per se.. We need to look at other measures for reducing carbon content, issues associated with accreditation of carbon verifiers and possible benefits or exemptions for MSMEs,” the official pointed out.

The CBAM issue came up for discussion recently at the India-EU senior officials (Indian Commerce Secretary and EU Director General) virtual meeting on the proposed India-EU FTA on May 7. “Discussions took place on the challenges associated with CBAM,” the official said.

Issues under various policy areas sch as market access in goods, services, investment, government procurement, rules of origin, SPS/TBT, energy and raw materials, trade & sustainable development and IPR were discussed in the meeting, the official added.

The eighth round of talks on the India-EU FTA negotiations is scheduled on June 24-28 in Brussels.

“There is a willingness from the EU side to look at India’s perspective in a much more favourable manner now. They understood some of our issues from a much better perspective,” he said. The attitude of other countries to look at the China-plus story is visible while negotiating FTAs, he added.

The CBAM is a regulation introduced by the EU to put a “fair”’ price on carbon emitted during the production of items identified as carbon-intensive from non-EU countries. This will be in the form of higher import levies which will be applicable from January 2026. “The EU’s argument is that it has to meet its commitment of reaching net zero carbon dioxide emission by 2050. The CBAM is to create a level playing field with EU companies which already account for their carbon emission through the bloc’s Emission Trading Sytem (ETS),” the official said.

While the items covered under CBAM include cement, iron and steel, aluminium, fertilisers, electricity and hydrogen, in India, the hardest hit sectors could be iron & steel and aluminium, followed by cement.