India is drafting a support scheme to cover 90% of compliance costs for micro, small, and medium enterprises (MSMEs) exporting to the European Union under the Carbon Border Adjustment Mechanism (CBAM). The subsidy aims to offset the high upfront costs of carbon accounting, third-party audits, and digital reporting systems, which range from ₹15 lakh to ₹20 lakh per unit. Without verified emissions data, exporters face default values that rise by 10% in 2026, 20% in 2027, and 30% from 2028, effectively pricing them out of the EU market. The iron and steel sector is most at risk, with potential export declines of 24% to the EU, according to ICRIER data. Aluminum and fertilizer sectors are also affected. The scheme follows failed efforts to secure exemptions for smaller exporters. Investors should watch for formal rollout details, including sector coverage and fund distribution, as well as the UK's planned carbon border tax starting in 2027.
