A senior Indian commerce ministry official said the proposed India-EU free trade agreement includes a dedicated roadmap to help small and medium enterprises deal with the EU's Carbon Border Adjustment Mechanism (CBAM). The pact is expected to be signed this year and implemented in 2027. The CBAM chapter required significant negotiating effort and contains specific commitments to address India's concerns, including flexibility provisions for future changes. For Indian SMEs that export to Europe, CBAM compliance means tracking and reporting embedded emissions in their products. The trade deal aims to provide a structured path for these businesses to meet EU carbon accounting requirements without being priced out of the market. The details of the annexure and what flexibility means in practice will matter most for exporters. This is a concrete example of how trade policy is being used to manage carbon border adjustments, rather than leaving companies to navigate them alone. The outcome will test whether such bilateral agreements can actually reduce compliance costs for smaller firms or if the administrative burden remains too high.
