For Indian exporters, the European Union’s Carbon Border Adjustment Mechanism is no longer a distant regulatory threat. It is becoming a cost that can be measured, audited and eventually reflected in the price of every tonne of carbon-intensive material entering Europe.
India therefore has to prepare on two fronts simultaneously: reducing the carbon intensity of production and ensuring that the machinery created to demonstrate compliance does not itself become an expensive new layer of regulation.
The Department of Commerce has constituted a Committee on Export Preparedness for EU CBAM, chaired by the Additional Secretary dealing with bilateral trade negotiations. The committee brings together ministries, regulators and industry bodies to coordinate India’s response. A key priority is building domestic capacity to verify the embedded emissions of goods exported to Europe.
That is increasingly urgent because CBAM entered its definitive phase on January 1, 2026. It currently covers iron and steel, aluminium, cement, fertilisers, electricity and hydrogen. EU importers covered by the mechanism must account for embedded emissions and surrender CBAM certificates whose price is linked to allowances under the EU Emissions Trading System. The certificate price was €75.36 per tonne of CO2 for the first quarter of 2026 and €75.28 for the second.
The verification challenge
India’s immediate problem is not simply carbon emissions. It is proving, in a form acceptable to European regulators, exactly how much carbon was emitted in making a particular product.
The National Accreditation Board for Certification Bodies (NABCB) has been consulting prospective validation and verification bodies. Two accredited Indian bodies have applied for EU and UK CBAM-related accreditation, with assessments under way. India is simultaneously seeking EU recognition of NABCB itself as an accreditation body for CBAM verifiers.
Commerce and Industry Minister Piyush Goyal has raised the matter with the EU Commissioner for Trade and Economic Security, while discussions are also taking place with the European Commission’s DG TAXUD.
Recognition could have substantial economic value. If Indian steel and aluminium producers have to depend heavily on overseas verification agencies, the costs of audits, certification, documentation and specialist consultancy could rise. For large integrated producers these expenses may be manageable. For smaller manufacturers and downstream exporters operating on thin margins, they could become a significant barrier to the European market.
The objective, therefore, should be to build a competitive ecosystem of credible Indian verifiers rather than merely creating another mandatory certification industry.
The European Commission requires verification at the level of the installation producing CBAM goods. Operators must monitor and calculate embedded emissions according to prescribed methodologies, after which accredited verifiers examine the monitoring system, calculations and supporting evidence and issue verification reports.
This makes accreditation a strategic trade infrastructure issue, much like testing laboratories, standards certification and customs systems.
Don’t turn decarbonisation into a compliance maze
There is a broader risk. In responding to CBAM, India could inadvertently construct an elaborate domestic compliance architecture involving multiple audits, consultants, databases, certificates and reporting requirements. That would defeat part of the purpose of improving export competitiveness.
The government has already begun educating exporters. In August, the Department of Commerce, NABCB and Engineering Export Promotion Council held an awareness programme covering embedded-emissions calculations, data collection, reporting, accreditation and verification. The next stage should focus on reducing duplication.
Wherever possible, emissions data should be generated automatically from production and energy records and made reusable across regulatory systems. An exporter that has already provided authenticated information to one government-recognised platform should not repeatedly commission separate exercises to establish the same facts.
This will be particularly important for MSMEs. Large steelmakers can establish specialised sustainability teams and invest in sophisticated carbon-accounting systems. A small engineering exporter purchasing steel from several suppliers cannot reasonably be expected to reconstruct the emissions history of every input.
The upstream data problem
This leads to perhaps the most important issue confronting Indian industry: the carbon information has to travel with the material.
The Commerce Department has raised with the Ministry of Steel the need for upstream producers to calculate and provide embedded-emissions information. Without reliable upstream data, downstream manufacturers may struggle to establish the carbon content of finished goods. India therefore needs something resembling a digital carbon trail through industrial supply chains.
Steel, aluminium and other covered materials could carry standardised, machine-readable emissions information as they move from primary producers to processors and exporters. Such a framework would reduce repeated verification, improve traceability and allow manufacturers to identify lower-carbon suppliers.
This is where CBAM preparation can become industrial policy rather than merely trade compliance.
The real objective is lower-carbon production
India should also avoid confusing better carbon accounting with actual decarbonisation. An efficient verification system can establish the carbon content of Indian steel; it cannot make that steel cleaner.
The longer-term response requires cheaper renewable electricity, greater energy efficiency, increased scrap utilisation where technologically appropriate, cleaner industrial processes and eventually wider deployment of technologies such as green hydrogen and low-carbon steelmaking.
The stakes are considerable. The Economic Survey had noted that the share of CBAM-covered products in India’s exports to the EU increased from 6.3% in 2014 to 10.5% in 2023. Iron and steel represented by far the largest component, followed by aluminium.
India’s recent trade arrangements with Europe could increase the importance of solving the problem. The latest India-EU trade agreement provides India greater access to the European steel market, but CBAM obligations continue to apply to Indian steel exports.
That creates an unusual situation: tariff barriers may decline even as carbon-related costs become more important.
India’s response must consequently go beyond seeking concessions from Brussels. Recognition of NABCB and Indian verification bodies is important, but the larger objective should be a low-cost national emissions measurement and verification infrastructure that makes Indian manufacturing more competitive.
CBAM should not result in Indian factories carrying three additional costs simultaneously—the carbon cost itself, the investment needed to decarbonise, and an expensive domestic compliance bureaucracy.
The first two may increasingly become unavoidable features of global manufacturing. The third is largely within India’s control. If the new committee can ensure credible carbon accounting while keeping verification inexpensive, digital and minimally bureaucratic, India’s preparation for CBAM could strengthen industrial competitiveness rather than merely add another cost to producing in India.
