India and European Commission Agree to Continue Carbon Market Cooperation

India and the European Commission have agreed to continue technical cooperation on carbon markets, carbon pricing and the methodologies associated with the European Union’s Carbon Border Adjustment Mechanism (CBAM). The agreement followed a meeting in New Delhi on October 12, 2026, between India’s Power Secretary Pankaj Agarwal and Gerassimos Thomas, the European Commission’s Director-General for Taxation and Customs Union. The discussions focused on India’s developing domestic carbon market, the EU’s carbon-border policy and opportunities to strengthen technical engagement between the two sides.

The talks come as India implements its Carbon Credit Trading Scheme (CCTS) and the EU moves ahead with its carbon-border framework. Indian exporters of emissions-intensive products, including steel and aluminium, face growing pressure to measure and report the emissions associated with their goods sold into the European market. The two sides identified recognition of carbon-pricing mechanisms, monitoring, reporting and verification systems, and capacity building as areas for continued dialogue. However, the agreement does not itself establish an exemption for Indian exports from CBAM requirements or charges.

Key Takeaways

• Continued cooperation: India and the European Commission agreed to strengthen technical engagement on carbon markets and carbon pricing.
• CBAM discussions: The meeting covered the EU’s Carbon Border Adjustment Mechanism and related methodologies.
• India’s carbon market: The government highlighted emission-intensity reduction targets notified for 490 industrial units under the domestic Carbon Credit Trading Scheme.
• Emissions reporting: Monitoring, reporting and verification systems were identified as important areas for cooperation.
• Exporter implications: Indian businesses supplying emissions-intensive goods to Europe may need reliable emissions data and documentation to comply with applicable rules.
• No confirmed exemption: The agreement signals continued dialogue, not a waiver of EU carbon-border requirements for Indian companies.
• Energy transition: India’s growing non-fossil electricity capacity is part of the broader context for reducing emissions intensity across the economy.

India and EU Strengthen Carbon Market Dialogue

The October 12 meeting brought together officials responsible for important parts of India’s power and carbon-market policy and the EU’s taxation and customs framework. The Indian side was represented by Power Secretary Pankaj Agarwal, while the European Commission delegation included Gerassimos Thomas.

According to India’s Ministry of Power, the discussions covered India’s progress in developing a domestic carbon market, the implementation of CBAM and opportunities for further technical cooperation. Both sides expressed willingness to continue engagement on how carbon-pricing systems are designed, measured and applied.

The discussions are significant because carbon markets increasingly influence industrial competitiveness and international trade. Governments are developing mechanisms to encourage businesses to reduce emissions, while import regulations are increasingly taking the carbon intensity of products into account.

For India, the challenge is to develop a domestic system that supports emissions reductions while allowing industries to compete in international markets. For the EU, the challenge is to apply its climate framework to imported products while addressing concerns about carbon leakage and differences between countries’ climate policies.

The meeting provides a framework for continued technical discussions. It does not, by itself, change the legal requirements applicable to Indian exporters under EU law.

What Is India’s Carbon Credit Trading Scheme?

India’s Carbon Credit Trading Scheme is the framework through which the government is developing a domestic compliance carbon market. It is intended to create incentives for businesses to reduce greenhouse gas emissions and improve the emissions intensity of industrial activity.

Under an emissions-intensity approach, companies are assessed against targets linked to the amount of emissions generated relative to a defined unit of output. This differs from a system that simply places an identical absolute emissions cap on every participating business.

The government has notified emission-intensity reduction targets for 490 industrial units, according to the Ministry of Power’s statement following the meeting.

These targets are important because industrial production varies significantly across sectors. Steel, cement, aluminium and other energy-intensive industries have different production processes, fuel requirements and opportunities for reducing emissions. A framework based on defined performance targets can help establish measurable expectations for covered facilities.

How Carbon Credits Work

A carbon credit generally represents a defined quantity of greenhouse gas emissions, often expressed as one tonne of carbon dioxide equivalent. In a compliance market, eligible credits or other units can be used according to the applicable rules to demonstrate compliance with specified obligations.

The precise rules determine how credits are created, verified, transferred and used. They also establish who is covered, how emissions are measured and what happens when a company does not meet its requirements.

A credible carbon market depends on reliable data and robust verification. If emissions reductions are incorrectly measured or overstated, the system may fail to create the intended environmental benefits.

For this reason, monitoring, reporting and verification systems are central to the India-EU discussions. These systems help establish the emissions baseline, record actual performance and provide evidence that reported reductions meet the relevant requirements.

What Is the EU’s Carbon Border Adjustment Mechanism?

The EU’s Carbon Border Adjustment Mechanism is designed to place a carbon cost on certain imported goods based on the emissions associated with their production. It complements the EU Emissions Trading System, under which covered European installations face carbon-pricing obligations.

The mechanism aims to address carbon leakage, a situation in which production shifts to jurisdictions with less stringent climate constraints without a corresponding reduction in global emissions. If production moves abroad and emissions remain unchanged, the environmental benefit of domestic climate policies can be undermined.

CBAM is intended to reduce that risk by bringing the carbon content of certain imports into the EU’s regulatory framework. Its implementation has implications for foreign manufacturers selling covered products into the European market.

The mechanism initially covers specified categories of goods, including cement, iron and steel, aluminium, fertilisers, electricity and hydrogen, subject to the rules and product definitions in EU legislation. The precise obligations depend on the product, importer, emissions data and applicable requirements.

Why CBAM Matters for Indian Exporters

India exports industrial goods to Europe, including products that can be energy-intensive to manufacture. For companies selling covered goods into the EU, the carbon content of production can become a factor in compliance costs and commercial competitiveness.

Exporters may need to provide detailed information about direct emissions and, where required under the relevant rules, other emissions associated with production. The information must be prepared according to applicable methodologies rather than based solely on general company estimates.

If reliable emissions data is unavailable, companies may face additional administrative challenges or have to rely on prescribed default values where the rules permit. Those values may not reflect the actual emissions performance of a particular production facility.

The cost implications will vary by product, production method, emissions intensity and applicable carbon-price calculations. It would therefore be inaccurate to assume that all Indian exporters will face the same CBAM cost or that every shipment will be affected identically.

Why India Wants Technical Cooperation on CBAM

India and the EU operate different policy systems and have distinct economic and industrial structures. Technical engagement can help officials understand how their respective carbon-pricing systems measure emissions, recognise reductions and assess the carbon content of products.

The Indian government has highlighted the development of its domestic carbon market as part of its broader climate and industrial policy. The EU, meanwhile, is implementing CBAM and developing the methodologies needed to apply its framework.

The two sides have agreed to continue dialogue on the recognition of carbon-pricing mechanisms and CBAM-related methodologies. This could provide an opportunity to discuss technical differences and improve understanding of each system’s requirements.

However, technical cooperation does not automatically mean that one jurisdiction will recognise another’s carbon credits or treat its carbon-pricing rules as equivalent. Such outcomes depend on the relevant legal framework, eligibility conditions and any formal decisions made by the authorities.

Recognition of Carbon Pricing Mechanisms

Recognition matters because countries may use different approaches to price or regulate emissions. Some rely on emissions trading systems, others use carbon taxes, and some combine multiple policy instruments.

The presence of a domestic carbon-pricing mechanism does not automatically establish that its costs can be deducted from obligations under another jurisdiction’s system. The applicable rules determine whether a carbon price is recognised and how any adjustment is calculated.

For Indian exporters, the practical issue is whether the domestic carbon costs they face can be accounted for under EU rules when covered goods enter the European market. The October meeting established continued technical engagement on this subject, but did not announce a final arrangement or a blanket recognition decision.

Monitoring, Reporting and Verification Will Be Critical

Monitoring, reporting and verification, commonly abbreviated as MRV, refers to the processes used to measure emissions, report data and independently verify whether the information is reliable.

These systems matter because carbon markets rely on accurate measurements. Regulators, buyers and trading partners need to know how much a facility emits, how the figure was calculated and whether the data follows the applicable standards.

For an industrial exporter, the work may involve collecting fuel-consumption data, measuring emissions from production processes, maintaining records and ensuring that the information is consistent across reporting periods.

What Businesses May Need to Prepare

Companies affected by carbon-pricing or border-reporting requirements can review several areas of their operations:

Area	Why it matters
Facility-level emissions data	Establishes the emissions associated with production
Fuel and electricity records	Helps quantify relevant energy-related emissions
Production data	Supports calculations of emissions intensity
Reporting methodology	Ensures calculations follow applicable rules
Independent verification	Improves confidence in reported figures
Supplier information	May be required to establish emissions associated with inputs
Compliance documentation	Helps demonstrate that reporting obligations have been met

The exact requirements depend on the product and applicable regulations. Not every company will face the same reporting obligations, and businesses should consult the relevant legal and technical guidance for their products.

Better MRV systems could help Indian companies improve internal energy management as well as prepare for overseas regulatory requirements. Accurate information can also help identify where process improvements or cleaner energy could reduce emissions and operating costs.

India’s Non-Fossil Power Capacity Reaches 308 GW

During the meeting, India’s Power Secretary highlighted the country’s progress in expanding non-fossil electricity capacity. The Ministry of Power said non-fossil sources accounted for 308 GW of India’s total installed power capacity of 558 GW.

That figure refers to installed capacity, not the amount of electricity generated during a given period. Installed capacity measures the maximum rated output of power facilities under specified conditions, while actual generation depends on resource availability, operating conditions and system demand.

The distinction is particularly important for renewable sources such as solar and wind, whose output varies with weather and time of day. Nevertheless, expanding non-fossil capacity is relevant to India’s emissions-intensity goals because electricity is an important input for many industrial processes.

Cleaner Electricity and Industrial Competitiveness

For manufacturers, the carbon intensity of electricity can influence the emissions associated with production. Where companies can access lower-emissions electricity or improve energy efficiency, they may be able to reduce their emissions per unit of output.

However, the effect varies by industrial process. Some emissions arise from electricity consumption, while others come directly from chemical reactions, fuel combustion or the use of carbon-intensive raw materials.

Reducing emissions therefore requires a combination of measures, which may include energy efficiency, cleaner electricity, process changes, alternative fuels and new production technologies.

India’s expansion of non-fossil power capacity is one part of this wider transition. It does not, by itself, establish that the emissions intensity of every industrial product has fallen or that a particular export meets EU requirements.

Potential Impact on Steel, Aluminium and Other Industries

Steel and aluminium are important examples of industries in which emissions intensity can influence the economics of exports to markets with carbon-related import rules. Production processes, fuel choices, electricity sources and technology can all affect the emissions associated with a tonne of output.

For exporters, the impact of CBAM depends on the products covered, the applicable emissions methodology, the carbon price and the details of the relevant compliance rules. Companies with relatively emissions-intensive production may face different challenges from facilities that use cleaner processes.

The same principle applies to other covered sectors. Cement production, for example, has process-related emissions in addition to energy-related emissions. Fertiliser production can also have a significant emissions footprint depending on the production method and fuel inputs.

Possible Business Responses

Businesses may respond to carbon-related trade requirements by improving emissions measurement, investing in energy efficiency, switching to cleaner electricity where feasible or changing production processes. Some may also review their product mix, supply chains and export markets.

These changes can require significant upfront investment. The commercial case depends on the cost of the upgrades, energy prices, product demand, regulatory requirements and the ability to pass some costs through to customers.

Technical cooperation between India and the EU could help clarify methodologies and improve understanding of compliance requirements. It should not be assumed, however, that the talks will immediately lower costs for exporters or eliminate the need for emissions-related investment.

The Bigger Picture

The India-EU agreement reflects the growing connection between climate policy and international trade. Carbon markets were initially discussed largely as tools for reducing emissions, but their methodologies and pricing mechanisms increasingly affect how industrial products compete across borders.

For India, developing a domestic carbon market could support measurable emissions reductions while helping companies build the systems needed to report their environmental performance. For the EU, CBAM is intended to align the carbon cost of certain imports more closely with the framework applied to European producers. The two approaches operate under different legal systems, making technical engagement important but not sufficient on its own to guarantee mutual recognition.

The October meeting creates an opportunity to continue discussions on carbon pricing, emissions data and implementation methods. The commercial outcome for Indian exporters will depend on the rules ultimately applied, the emissions intensity of their products and any formal decisions that follow the talks.

Looking Ahead

The next developments to watch include further India-EU technical meetings, clarifications on carbon-pricing recognition, and guidance on monitoring, reporting and verification. Indian exporters of covered products should continue to track the applicable EU rules and ensure that their emissions data and documentation meet the relevant requirements. Any change in compliance costs or recognition arrangements will depend on formal policy decisions rather than the continuation of dialogue alone.

For Indian industry, the longer-term task is to combine regulatory preparedness with practical emissions reductions. More reliable emissions measurement can help companies identify opportunities to improve energy efficiency and production processes, while continued investment in cleaner electricity and industrial technology may support competitiveness. The success of the cooperation will ultimately depend on whether technical engagement produces clearer methodologies and workable arrangements without compromising the integrity of emissions accounting.