CBAM Taxation Begins: Are Indian Exporters Prepared?

Effective from 1 January 2026, the European Union has officially entered the **taxation phase **of the Carbon Border Adjustment Mechanism (CBAM). EU importers are now required to pay carbon taxes on the embedded greenhouse gas emissions of imported goods.

The European Commission released detailed guidelines in December 2025, covering CBAM reporting, free emission allowances, carbon pricing, and verification procedures.

The key implications for Indian exporters include:

These implications are elaborated below.

1. Accurate CBAM Reporting

Exporters must ensure that accurate and verifiable emissions data is available for their own manufacturing processes as well as for raw material suppliers. If supplier emissions data is not available or not verified, default values may apply, increasing CBAM costs. Exporters should therefore work with suppliers that have proper carbon measurement and verification systems.

2. Assessment of Free Emission Allowances and Carbon Tax Liability

Free emission allowances under CBAM are calculated using benchmark values provided in EU Regulation (EU) 2025/2620 dated 16 December 2025 (Page 9 onwards, Column A). Carbon prices for 2026 will be published quarterly, and CBAM tax will be payable on emissions above the free allowances, based on the applicable carbon price.

What comes next?

Going forward, exporters should assess carbon emission reduction strategies and ensure that their data and records are audit-ready, as CBAM audits will begin in January 2027.

Stay tuned for more insights!

Contributed by

Aniruddha Pandav Lead Consultant — Social Lab Environmental Solutions Pvt. Ltd.

Social Lab Environmental Solutions offers reliable and affordable sustainability solutions in the fields of CBAM, Carbon Neutrality, ESG Compliance, and EPR. To know more, please visit our website, Social Lab_, and follow us on _LinkedIn for sectoral updates.