India has sought exemption for MSMEs from the EU’s Carbon Border Adjustment Mechanism (CBAM), under which import taxes are to be imposed on certain identified carbon-intensive items such as steel and aluminium, the transitional phase for which will begin from October 1, Commerce Secretary Sunil Barthwal has said.

“In our interactions with the EU, we told them about the impact it will have on MSMEs, asking if there is possibility of a carve out for them,” Barthwal said in an interaction with the media on Thursday. The discussions are on, he said.

Come October 1, and exporters of seven carbon-intensive sectors to the EU, including steel, cement, fertiliser, aluminium and hydrocarbon products, will be required to report on the emissions embedded in the items subject to the mechanism.


“At the recent CBAM stakeholder consultation meeting, we discussed preparedness (of the Indian industry) for CBAM compliance,” Barthwal said. 

Earlier this week, the European Commission published a first call for feedback on the rules governing the implementation of the CBAM during its transitional phase, which starts on October 1 of this year and runs until the end of 2025. The draft Implementing regulation details the reporting obligations and information sought from EU importers of CBAM goods, as well as the provisional methodology for calculating embedded emissions released during the production process of CBAM goods.

“In the CBAM’s transitional phase, traders will only have to report on the emissions embedded in their imports subject to the mechanism without paying any financial adjustment. This will give time for businesses to prepare and will provide the necessary information to fine-tune the definitive methodology by 2026,” per a statement issued by the European Commission.

In 2022, India’s 27 per cent exports of iron, steel and aluminium products worth $8.2 billion went to the EU, according to a research paper brought out by Delhi-based GTRI.