Absence Of Carbon Tax Exemption In UK FTA Raises Concerns For Indian Exports: GTRI

New Delhi, July 26 (KNN) India was unable to secure an exemption from the UK’s upcoming Carbon Border Adjustment Mechanism (CBAM) as part of the Comprehensive Economic and Trade Agreement (CETA) signed on Thursday. 

This move could significantly affect carbon-intensive Indian exports, the Global Trade Research Initiative (GTRI) said on Friday.

The UK is set to implement CBAM from January 2027, mirroring the European Union’s mechanism, and will impose carbon taxes on imports in high-emission sectors such as iron, steel, aluminium, fertilisers, cement, ceramics, hydrogen, and glass. 

Tax rates could range between 14–24 percent, depending on the carbon intensity of the products.

GTRI Founder Ajay Srivastava termed the lack of a carve-out for Indian exports a ‘missed opportunity’, warning that, despite India granting duty-free access to UK goods, it faces future levies on its carbon-intensive exports. 

“From January 2027, the UK can impose carbon taxes on Indian steel and aluminium even as we offer duty-free entry to British goods. That’s a serious asymmetry,” he said, adding that similar challenges may arise in the ongoing India–EU FTA negotiations.

According to GTRI, Indian exports worth approximately USD 775 million annually—primarily in iron and steel, aluminium, fertiliser, and cement—could be at risk under the UK’s CBAM framework.

India has previously flagged CBAM as a non-tariff trade barrier, voicing concerns over its potential to distort international trade and penalise developing countries with lower per-capita emissions.

However, an official familiar with the matter stated that India has reserved its right to retaliate or seek a rebalancing of concessions under the trade agreement, should the UK’s carbon tax adversely affect Indian exporters in the future.

(KNN Bureau)