UK CBAM: India seeks further talks ahead of January 1 carbon tax rollout

India will seek further discussions with the UK on the implementation of its Carbon Border Adjustment Mechanism (CBAM), its carbon tariffs on import regime, set to take effect from January 1, 2027, to gain greater clarity on the regulations and their implementation. This comes as London fine-tunes the rules for calculating and verifying emissions while ruling out exemptions for free trade agreement (FTA) partners, sources said.

“Although London has recognised India’s Carbon Credit Trading Scheme (CCTS) as a qualifying scheme, the rules for calculating and verifying emissions are still being fine-tuned leading to uncertainty in India on how things will play out. New Delhi wants parallel talks on the regulations and their implementation once the legislation is final,” an official said.

London will impose CBAM from January 1, as scheduled, taxing the embedded emissions in imports such as steel and aluminium, with no exemptions even for free trade partners such as India, sources said.

“The UK has held consultations with India on the draft CBAM and is open to more, but it is not inclined to exempt India or any other FTA partner from the carbon levy,” a source close to developments in the UK said.

India had argued for flexibilities and relaxations in application of CBAM regulations on Indian industry in lieu of the India-UK FTA implemented in July this year, but the UK refused on the ground that it was not able to extend special treatment to any country.

CBAM regulations will apply to specific ‘CBAM goods’ that are imported into the UK from five sectors–aluminium, cement, fertiliser, hydrogen and iron and steel. India’s exports worth $775 million may be impacted due to imposition of the carbon tax, per estimates made by trade research body GTRI.

The UK government published an updated policy summary and technical guidance on October 16, 2026, but final default rates, supporting legal notices and some operational guidance remain outstanding or subject to revision.

As India’s CCTS is one of the recognised qualifying scheme, if an Indian producer has already paid a verified carbon price under the mechanism, the UK importer can claim a credit or relief against that UK CBAM charge.

But it is not an automatic exemption. “Indian producers would need to establish the relevant emissions data and demonstrate that the carbon price qualifies for relief under the UK system. Any difference between the carbon price recognised for relief and the UK CBAM charge would remain payable,” an industry source said. Compliance will also depend on meeting emissions monitoring, verification and documentation requirements.

“The UK has said it will publish further details on these default emission values and the methodology for calculating and verifying the effective carbon price ahead of CBAM implementation,” the source said.

As part of the India-UK FTA, India has formally reserved its rights to rebalance concessions or apply retaliatory duties if the UK’s 2027 carbon tax materially damages Indian metal and engineering exports, Indian officials earlier said.