India–EU FTA concluded, but CBAM stays fully applicable to Indian exports.
Deal offers funding support, not exemptions, for India’s green transition.
CBAM hits key sectors like steel and aluminium—10% of India’s EU exports.
EU pledges preferential treatment talks and €500mn climate support for India.
India and the European Union today concluded their much-anticipated free trade agreement (FTA), heralded by both sides as “the mother of all deals”. Yet the agreement brings no direct relief to India’s carbon-intensive sectors, with the EU’s Carbon Border Adjustment Mechanism (CBAM) remaining firmly in place for Indian exports.
The commerce ministry earlier noted that the pact will include financial support mechanisms to help Indian exporters reduce emissions and comply with the CBAM. However, the FTA does not provide any exemption for India.
1 January 2026
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"We have given this commitment that in case they are able to bring in any flexibility under CBAM for any part of the country across the world, we would like to have that flexibility as well," Commerce Secretary Rajesh Agrawal informed.
He added that CBAM remains a non-governmental obligation, but they will be working together to find a pathway.
In other words, CBAM cannot be removed, but both parties are trying to use the trade agreement to soften its impact and keep Indian exports competitive.
Europe’s drive to cut greenhouse gas emissions by 55% by 2030 is triggering a sweeping overhaul of its climate policies. Under the “Fit for 55” package, it is strengthening its emissions trading system (ETS) and launching CBAM.
CBAM covers iron and steel, aluminium, cement, fertilisers, electricity and hydrogen, together forming around 10% of India’s exports to the EU. Out of all, the EU has long been a crucial market for Indian steel. India, the world’s second-largest producer, ships two-thirds of its steel exports to Europe.
Responding to questions on the EU’s late 2025 proposals to protect the EU steel industry, Commerce and Industry Minister Piyush Goyal said,"We have agreed in good faith to work towards preferential treatment for India as an FTA partner, so that India receives a better deal than countries with whom the EU does not have a trade agreement. I believe this will be resolved satisfactorily over time."
Notably, New Delhi and Brussels have committed €500mn in support over the next two years to help India reduce greenhouse gas emissions and advance its green transition.
