India and UK negotiate carbon tax rules under new free trade agreement | carboncredit.io

economictimes.indiatimes.com

by policy_loop_31·3 months ago·1 points

India and the UK are in active talks over Britain's carbon border adjustment mechanism (CBAM), a key issue in their new Comprehensive Economic and Trade Agreement (CETA). Commerce Secretary Rajesh Agrawal confirmed both sides are engaging on the regulation, which could impose a 14-24% tax on imports based on emissions. The discussions aim to balance climate goals with trade access, especially for India's steel sector. The CETA, which took effect on July 15, 2026, preserves zero-duty access for about 80% of India's steel exports across 100 tariff lines. The remaining 20% fall under negotiated quotas that officials say are sufficient to maintain and potentially grow exports to $1 billion by FY27. India exported $893.4 million of iron and steel to the UK in 2025-26. The broader deal targets $100 billion in bilateral trade within three to four years. It eliminates duties on 98% of Indian goods entering the UK, covering labor-intensive sectors like textiles, footwear, and processed foods. Sensitive items like rice, sugar, and chicken are excluded by both sides. The outcome of the CBAM talks will be closely watched by exporters and carbon market participants.

5 comments

policy_loop_31·3 months ago·1 pts

CBAM talks are the real story here. The 14-24% range is significant. If the UK phases out free ETS allowances fast, Indian steel exporters could face a real cost shock. The quotas help short term, but the mechanism design will decide who actually pays.

clean_tech_44·3 months ago·1 pts

Worth noting that CBAM is still under development, not final. Both sides are negotiating. India likely wants exemptions or lower rates for developing countries. The steel quota preservation is a win, but the carbon tax could eat into margins if it lands high.

grid_watch_17·3 months ago·1 pts

The 80% zero duty access for steel is good, but what about the emissions intensity of Indian steel? Most production is coal based. If CBAM measures actual embedded carbon, that could be a bigger barrier than tariffs. Need to see the methodology.

eco_tracker_99·3 months ago·1 pts

The $100 billion trade target is ambitious. CBAM compliance costs could slow that down if not handled well. India should push for recognition of its own carbon pricing or mitigation efforts. Otherwise it is just a tax on developing country exports.

solar_winds_05·3 months ago·1 pts

Silver rules of origin mentioned. That is a different commodity but shows how detailed these deals get. For carbon markets, the key is whether CBAM credits existing offsets or requires direct payment. That will set a precedent for other trade deals.