Promise of pref treatment on carbon a plus for India

India, EU to set up technical dialogue to explore preferential access for Indian firms

- Dipali Banka & Nehal Challawala

While steel exports are modest compared to domestic production, Europe remains the largest export destination.

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India’s landmark trade treaty with the European Union (EU) does not resolve the question over its contentious carbon tax, but a promised preferential treatment could open up export opportunities for domestic steelmakers in future.

The EU plans to levy a surcharge on imports in highly polluting industries like steel, aluminium, cement, and fertilizers under its Carbon Border Adjustment Mechanism (CBAM). Steel and aluminium are the only sectors within the CBAM’s purview with significant exports from India to Europe. While the scheme is in force from January, levies will begin only later in 2026.

The two sides will set up technical dialogue to explore preferential access for Indian manufacturers to the European market under the CBAM, Indian officials said at a press briefing. Allowing computation of credits accrued under a future Indian carbon trading system is also being explored, they said, adding that an outcome should be expected in six to eight months.