EU-India FTA leaves CBAM untouched

Market: Emissions
27/01/26

The free trade agreement (FTA) concluded with New Delhi does not provide for any exemption to the bloc's carbon border adjustment mechanism (CBAM), the European Commission confirmed today.

"There is no commitment on the part of the EU to change our obligations with regard to the carbon border adjustment mechanism (CBAM), or grant India more favourable treatment," said Paula Pinho, chief commission spokesperson. She indicated that India's treatment under CBAM will not be more favourable than other states.

CBAM is the EU's climate policy tool designed to impose a carbon charge on emissions embedded in specific imported goods, aiming to prevent "carbon leakage" by aligning import costs with EU carbon prices.

The EU and India concluded FTA negotiations eliminating or reducing tariffs covering 96.6pc of EU goods exports to India on 27 January.

Pinho further noted that there is an entire chapter in the FTA on climate change and decarbonisation. "We will cooperate with India on decarbonisation as well."

Another senior EU official noted CBAM as one of the most contentious issues alongside steel and cars. During negotiations, India initially took a "very radical" stance on the EU's carbon border. But the FTA now opens the possibility for "technical dialogue" on CBAM. The official added that there is not an FTA chapter on raw materials or energy.

The EU and India commit to launching, in the first half of 2026, a platform on climate action. And €500mn ($599mn) in EU support is "envisaged", over the next two years, to help India's efforts greenhouse gas (GHG) mitigation efforts.

By excluding sensitive agricultural imports into the EU such as beef, chicken meat, rice and sugar, and issues related to deforestation, the EU-India deal is not expected to be as politically controversial in the European Parliament as the FTA with Mercosur countries — Argentina, Brazil, Paraguay and Uruguay.

But EU officials point to a year-long process of formal EU adoption and entry into force beginning with legal revision, translation and publication of the FTA drafts. Following EU states' consent for the Commission to sign the FTA, EU law allows for trade deals under exclusive EU competence to be provisionally applied. But parliament has insisted on first giving consent.

By Dafydd ab Iago

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