Amidst Trump’s tariff war, the EU has scaled down on CBAM rigidness with a set of revised guidelines. India, on its part, started discussions on these Carbon Border Adjustment Mechanism (CBAM) proposals – that simplify reporting norms but also bring in stricter emission calculations – to analyse the impact on export-oriented sectors like steel and others.
Major changes proposed include reintroduction of new default values (pre-determined carbon intensity figures used to calculate embedded emissions) calculated on the higher threshold limits, a 50 tonne exemption from CBAM reporting norms, and annual review of carbon thresholds.
It introduces default carbon prices for third-country deductions, easing proof burdens.
The new rules, say officials, “offer flexibilities” that could benefit Indian exporters who can demonstrate lower carbon footprints.
Discussions or stakeholder suggestions have been sought with line Ministries like Steel and Commerce reaching out to trade bodies for suggestions and analysing impact.
“Trade and taxation departments of some of the ministries have reach out to us through the trade associations. And we are studying the impact, readying our suggestions on it,” said an exporter.
The CBAM is currently under transitional phase and is expected to be rolled out 2026 onwards.
A team from EU is expected to seek stakeholder suggestions and carry out meetings to discuss on these changes.
Default values
Under the new rules, if reliable emission data for an exporting country is unavailable, the EU will now use an average of the ten highest-emission intensity countries, with available data instead of a global default. Generally, default values are used when an importer or exporter do not provide verified emission data.
Importers, that is in this case -EU nations, can prove lower emissions for specific regions using “reliable data”. If done, they can apply lower region-specific default values instead of the Commission mandated values.
Rules allow free choice of default values without justification, simplifies default value setting (e.g., using top 10 high-emission countries’ averages), and excludes downstream process emissions for steel/aluminum and EU-produced precursors.
If India’s emission intensity is lower than the highest-polluting exporters, its steel and cement products could be assigned lower default values – benchmarked emission rates - potentially reducing CBAM costs.
Indian exporters could further lower their CBAM costs by providing verifiable data showing their actual emissions, allowing them to qualify for region-specific lower carbon values, a market observer explained.
Import threshold exemption
The EU has introduced a 50 tonne net mass exemption for CBAM-covered goods.
This is seen beneficial for some small and medium-sized exporters who ship limited quantities of steel and cement could avoid CBAM-related costs altogether.
“Large exporters, however, will still need to comply with CBAM reporting and payment obligations,” a steel-maker with exports to the EU said.
EU custom import data has show 80 per cent of CBAM importers accounted for 0.1 per cent of the embedded emissions, while 10 per cent for nearly 99 per cent (emissions).
Annual review
The CBAM threshold will be reviewed annually based on real trade data, with adjustments.
This means, if global trade patterns shift in favor of lower-carbon imports, Indian exporters might gain further relief through future adjustments. But, this also means potential future tightening of the exemption criteria if the EU decides that too many importers are avoiding CBAM obligations.
Exporters who adopt cleaner technologies and accurately report their emissions could see significant reduction in CBAM payments. This could make Indian products more competitive against EU domestic producers, who also have to pay carbon costs under the EU’s Emission Trading System (ETS).
Other changes
Amendmens also remove verification required for default value-based emissions and clarifies only direct emissions apply to electricity.
The reporting requirement shifts the CBAM declaration deadline to August 31 from May 31, and enhances third-country operator and verifier access to the CBAM Registry.
In terms of financial liability, it reduces the quarterly certificate holding requirement from 80 per cent to 50 per cent, offers calculation options (default values or prior year’s surrendered certificates), and adjusts repurchase rules.
It also delays 2026 certificate sales to February 2027, using quarterly ETS averages.