India and the United Kingdom are in talks over carbon tax regulations, Commerce Secretary Rajesh Agrawal said, as the two countries prepare to activate their free trade agreement. The UK plans to introduce its Carbon Border Adjustment Mechanism in 2027, which would impose extra tariffs on imports of iron, steel, aluminum, fertilizer, and cement. Indian exporters in these sectors could face new costs unless the CBAM rules are aligned with the trade deal. The India-UK Comprehensive Economic and Trade Agreement, signed last year, will take effect on July 15, 2026. Under the deal, the UK grants zero-duty access to 99 percent of Indian products, while India removes tariffs on 90 percent of product lines from the UK. However, CBAM coverage for specific goods remains unclear. Both sides are still negotiating how the carbon border levy will apply to Indian exports covered by the FTA. The outcome will matter for industries like steel, chemicals, and textiles that stand to benefit from duty-free access.
