CBAM–CCTS Integration: What It Means for Indian Exporters

The European Commission’s “New Strategic EU–India Agenda” (17 Sept 2025) highlights the need to deepen climate cooperation and promote India’s domestic carbon market. As part of this effort, the EU proposes to integrate its Carbon Border Adjustment Mechanism (CBAM) with India’s Carbon Credit Trading Scheme (CCTS).

**CBAM **is an EU regulation designed to prevent “carbon leakage” — the shifting of carbon-intensive production outside Europe — by imposing carbon taxes on imported goods. It currently applies to six sectors: iron & steel, aluminum, cement, fertilizers, hydrogen, and electricity. At present, CBAM requires emissions reporting only, with no direct cost implications. However, starting January 2026, EU importers will be required to pay carbon taxes based on the verified emissions associated with their imported goods.

CCTS, meanwhile, is India’s domestic carbon market framework aimed at meeting national climate goals through carbon pricing. The Greenhouse Gas Emission Intensity (GEI) Target Rules, 2025, notified on 8 October 2025, set emission-intensity targets for 2025–26 and 2026–27. The rules currently cover 53 major companies across four sectors — aluminium, cement, chlor-alkali, and pulp & paper — with more sectors expected to follow as the market expands.

What Will Happen Under the Proposed CBAM–CCTS Integration?

The proposed CBAM–CCTS linkage aims to avoid double carbon taxation and acknowledge India’s domestic carbon pricing efforts. The key implications are as follows.

• For the companies covered under CCTS, the carbon price paid under CCTS could be deducted from CBAM carbon taxes applicable on Indian imports.
• Since CCTS coverage is currently limited to large companies in four sectors, the initial benefits of this integration will primarily accrue to major players in these industries.
• CBAM reporting obligations will remain mandatory for Indian exporters in covered sectors, including those participating in CCTS.
• Over time, investing in low-carbon technologies, energy efficiency, and renewable energy will be essential to remain competitive in EU markets.

While promising, this integration is still in its early stages and will require close alignment of CCTS with CBAM on monitoring, reporting, and verification (MRV) systems, sectoral benchmarks, and carbon-pricing methodologies.

Stay tuned for more insights!

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