Finance
EU-India trade deal leaves bloc's carbon border tariff intact
Published by Global Banking and Finance Review
Posted on January 27, 2026
3 min readLast updated: January 27, 2026
Quick Summary
The EU-India trade deal leaves the carbon border tariff unchanged, affecting steel exports and emissions policies while providing financial support to India.
EU-India trade deal leaves bloc's carbon border tariff intact
Impact of the EU-India Trade Deal
By Kate Abnett
Concerns Over Carbon Border Adjustment
BRUSSELS, Jan 27 (Reuters) - A landmark trade deal struck by India and the European Union on Tuesday will not trigger any changes to the bloc's carbon border tariff, EU officials said, despite India's concerns over the scheme.
EU's Commitment to Fair Treatment
India has sharply criticised the world-first policy since the EU announced it in 2021, warning that the levy could hamper steel trade. The scheme this month began imposing fees on EU imports of steel, cement and other high-carbon goods.
Support for Emission Reductions
"Nothing will be phased out in terms of CBAM's implementation," an EU official said on Tuesday. The EU levy is known as the carbon border adjustment mechanism.
EU PLEDGES NO ONE WILL GET FAVOURABLE TREATMENT
India had appeared concerned during trade negotiations that the EU might offer exemptions to the U.S. as part of its trade deal with President Donald Trump, the official added.
A second EU official told Reuters the bloc had declined to change the levy, or offer more flexible CBAM rules to Indian companies.
Instead, Brussels and New Delhi agreed to hold talks on technical questions around the carbon levy, and the EU committed that it would not grant other countries more favourable treatment than India under the scheme.
That pledge changes nothing in practice, since EU legislation already states the bloc cannot give special treatment on CBAM to certain countries.
"We have neither the intention, nor even the possibility to start discriminating between countries when we implement the CBAM," the first official said.
The EU carbon levy is designed to put imports on a level footing with products manufactured in Europe, where factories already pay for their CO2 emissions.
But it has angered trading partners, including South Africa and Brazil, who say it penalises their economies and imposes EU standards on developing nations without the means to meet them.
The EU also agreed in the trade deal to provide 500 million euros in support to help India reduce emissions. India will also receive 1.6 million metric tons of duty-free steel exports to the EU, about half of its annual shipments to the bloc.
Industry executives and analysts have said the CBAM is likely to curb Indian steel exports to Europe, and prompt mills to seek alternative buyers in Africa and the Middle East.
Initially, imports will only face CBAM costs on a limited share of emissions, as the EU gradually phases in the levy.
(Reporting by Kate Abnett and Philip Blenkinsop in Brussels. Additional reporting by Shivangi Acharya in New Delhi. Editing by Mark Potter)
Key Takeaways
- •The EU-India trade deal does not alter the EU's carbon border tariff.
- •India criticized the carbon levy for potentially affecting steel trade.
- •The EU will provide 500 million euros to help India reduce emissions.
- •India receives 1.6 million metric tons of duty-free steel exports to the EU.
- •The carbon levy aims to equalize import and domestic product emissions costs.
Frequently Asked Questions about EU-India trade deal leaves bloc's carbon border tariff intact
1What is the carbon border adjustment mechanism?
The carbon border adjustment mechanism (CBAM) is a policy by the EU that imposes fees on imports of high-carbon goods to ensure fair competition with local products that already incur carbon costs.
2What are emissions reductions?
Emissions reductions refer to strategies and actions taken to decrease the amount of greenhouse gases released into the atmosphere, often aimed at combating climate change.
