Finance Minister Nirmala Sitharaman has expressed strong criticism of the European Union’s Carbon Border Adjustment Mechanism ( CBAM ), describing it as a unilateral and arbitrary move that could hurt Indian exports. The CBAM, a form of carbon taxation on imports of engineering goods into the European Union ( EU ), is set to take effect from January 1, 2026, targeting carbon-intensive industries such as steel, cement, and fertilizers.
Speaking at the Energy Transition Summit organised by the Financial Times, Sitharaman stated that the CBAM would create trade barriers that may negatively impact India’s exports, particularly in sectors like steel, cement, and engineering goods. She emphasised that India’s government has repeatedly raised concerns about the EU’s decision, stressing its unilateral nature and its potential harm to exporters.
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The EU’s CBAM aims to impose tariffs on imported goods with high carbon footprints as part of its strategy to address climate change. However, Sitharaman pointed out that such measures could impact India’s trade with the EU, one of its largest trading partners. In 2023-24, India’s total trade with the EU reached $137.41 billion, including $75.93 billion in exports.
Despite these concerns, Sitharaman expressed optimism that the ongoing Free Trade Agreement (FTA) negotiations between India and the EU would not be derailed by disagreements over the CBAM. “I am confident it won’t escalate to the level of hurting FTA talks,” she said, underscoring India’s commitment to achieving net-zero emissions by 2070.
The Finance Minister also highlighted the country’s ongoing green initiatives, such as the Production-Linked Incentive (PLI) scheme for renewable energy and electric vehicles, and the ‘PM Surya Ghar Muft Bijli Yojana,’ which aims to boost solar power adoption. These initiatives, she said, are part of India’s broader strategy to reduce carbon emissions and promote sustainability.
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As the EU prepares to implement CBAM, Indian exporters are advised to remain vigilant about the potential implications of the carbon tax and explore ways to mitigate transaction costs. The Finance Minister reiterated India’s commitment to climate goals and the continued dialogue with the EU on the potential impact of such unilateral measures.
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