India plans to cover 90% of the compliance costs that micro, small, and medium enterprises face under the EU's Carbon Border Adjustment Mechanism, which took effect in 2026. Each MSME could spend Rs 15-20 lakh per year on tracking embedded emissions for exports like steel, cement, and fertilizers. The subsidy aims to prevent these smaller businesses from losing price competitiveness in the EU market. Exporters who lack actual emissions data must use EU default values that include escalating mark-ups, starting at 10% in 2026 and rising to 30% by 2028. Indian iron and steel exports to the EU could drop by 24%, while overall global iron and steel exports may fall 5.7%. The UK plans its own CBAM version by 2027. The policy's effect on actual carbon reductions remains unclear according to an ICRIER report.
