India Excludes Carbon Tax From UK And EU Trade Talks

New Delhi, Jan 25 (KNN) According to the news reported by KNN on January 22, India's ongoing free trade negotiations with the United Kingdom and the European Union may exclude discussions on the contentious carbon border adjustment mechanism (CBAM), according to sources familiar with the matter.

The decision to skip talks on CBAM, a carbon tax on certain imports, is aimed at expediting the trade agreements, as the Indian government faces a looming term end.

The absence of an agreement on CBAM raises concerns for Indian steel exports to the UK and EU, potentially increasing export costs and reducing profits.

Talks on CBAM will now be conducted separately by the steel and external affairs ministries with their foreign counterparts.

The CBAM policies of the EU and the UK, set to take effect in January 2026, propose levying a carbon tax on imports of iron and steel, aluminium, cement, ceramics, fertiliser, glass, and hydrogen.

The objective is to establish a fair carbon price on goods produced outside the region while safeguarding local producers from price disadvantages.

Indian steelmakers have lobbied for concessions on CBAM, but with the topic excluded from FTA negotiations, uncertainty looms for the industry.

The exclusion could be seen as a strategic move by India, considering the opacity in the EU and UK's emission calculation mechanisms.

CBAM compliance requirements may impact Indian steel exports, potentially reducing profits by USD 60-165 per tonne between 2026 and 2034, as per Icra Ltd.'s analysis.

The Indian Steel Association, a leading lobby for the domestic steel industry, has not responded to queries.

Indian steelmakers view CBAM as a trade barrier, emphasising its lack of consideration for historical emissions of developed nations.

As the January 2026 deadline for the carbon tax approaches, the industry faces challenges in maintaining market share and profits in Europe.

In 2023, India exported approximately 3.6 million tonnes of finished steel to Europe and 0.4 million tonnes to the UK, constituting nearly half of the country's total steel exports, according to data from SteelMint.

(KNN Bureau)