India must balance EU carbon tariffs with economic interest, climate action

India must also press developed countries to fulfil their commitments on climate finance and technology transfers

India’s export-heavy industries are facing a new kind of trade barrier — one centered not on tariffs or quotas but on carbon emissions. The European Union’s Carbon Border Adjustment Mechanism (CBAM), designed to tax imports based on embedded carbon emissions, will fully apply by 2026, with the current transitional phase lasting until 2025.

Currently, EU importers are required only to report the carbon emissions embedded in goods such as iron and steel, cement, aluminium, electricity, fertilisers, and hydrogen from non-EU countries. However, by 2026, these imports will face a carbon levy, with companies needing to purchase CBAM certificates,