EU Opens Five ‘Doors’ for India Under Historic FTA

India and the European Union (EU) have recently signed a historic Free Trade Agreement (FTA), opening the doors for enhanced market access for Indian industries across 27 European countries. As part of the deal, the EU has provided India with five key assurances regarding the Carbon Border Adjustment Mechanism (CBAM), aimed at easing trade and ensuring fair carbon compliance.

1. Exemption on CBAM for India

Under the Most Favoured Nation (MFN) principle, India will receive equal treatment in future CBAM exemptions. If any other country is granted CBAM-related concessions, India will automatically be entitled to the same benefits under the newly signed FTA.

2. Technical Dialogue and Transparency

India and the EU will establish a technical working group to maintain full transparency on CBAM calculations. This includes detailed discussions on carbon measurement, calculation methods, and proposed fee structures, ensuring Indian industries understand and comply efficiently.

3. Assurance on Verification Mechanism

The EU has provided India with assurances regarding CBAM verification protocols. Indian organizations will be allowed to participate in the verification process, which ensures that greenhouse gas (GHG) and carbon emission data are accurately reported. Currently, verification is conducted mainly by EU-based bodies, which posed challenges and high costs for Indian exporters, especially small and medium enterprises.

4. Alignment with India’s Carbon Pricing Policy

India’s Carbon Credit Trading Scheme (CCTS) will be recognized under CBAM rules to avoid double taxation or fees on Indian goods. This ensures that as India implements its carbon pricing policy, Indian exports will not face additional carbon costs in EU markets.

5. Continuous Dialogue

The EU has agreed to maintain ongoing consultation and dialogue on CBAM issues, ensuring the mechanism remains flexible and responsive to emerging challenges faced by Indian industries.

Objective of the Assurances

CBAM is an ambitious EU climate initiative designed to prevent carbon leakage by applying equal carbon costs to imported and domestic products, aiming for climate neutrality by 2050. Key sectors impacted include fertilizers, hydrogen, power, iron and steel, cement, and aluminum, with India’s iron and steel exports particularly affected, as almost 90% of EU-bound Indian exports in these sectors are covered under CBAM regulations.

The five assurances are expected to smooth India’s market access to the EU while supporting its industries in transitioning toward greener and more sustainable production practices.