EU To Simplify Carbon Tax For Small Importers To Address India’s Concerns Amid FTA Talks — Profit Exclusive

The European Union is planning to simplify its Carbon Border Adjustment Mechanism, or CBAM regulations to address export concerns raised by India. The move aims to reduce the administrative burden for companies while maintaining the policy’s environmental goals.

Olof Gill, a spokesperson for the European Commission, told NDTV Profit In an email interview that based on the experience from the first year and a half of CBAM implementation, the EU is proposing simplifications to ease the process for small importers. Specifically, imports of less than 50 tonnes per year, which have low embedded emissions, will be exempt from CBAM. 

“This will benefit small producers in India, added that 90% of importers will not be affected by CBAM obligations," Gill said.

The relaxation from EU comes as part of the freshly resumed negotiations for a free trade agreement. The FTA is being pushed for realisation by the end of this year, according to joint statements by EU Commissioner Ursula Von Der Leyen and PM Narendra Modi on Friday.

The EU's CBAM is a carbon tax on imported goods, set to start on January 1, 2026, on seven carbon-intensive sectors, including steel, cement, and fertiliser aiming to make the EU carbon neutral by 2050. This is to promote cleaner industrial practices. Countries like India and China have criticised it, saying it acts as a trade barrier under the guise of reducing carbon emissions.

India has raised concerns about the CBAM for over a year and has asked for a transition period before fully following these rules.

While countries with a carbon pricing system can offset some costs, the EU will not charge double for carbon emissions, explained Gill. 

For those still covered by CBAM, the EU plans to simplify the approval process, emissions calculations, reporting, and financial responsibilities, making the system more manageable for small exporters.

"A simplified CBAM will have maximum effectiveness in preventing carbon leakage, but with minimal burden to most small importers and exporters,” he added.

Gill, referring to the ongoing deliberations between the EU and India, said the two sides are currently negotiating the FTA, an investment protection agreement and an agreement on geographical indications.

The current geopolitical and economic context makes talks a priority for both sides, he said.

The short-term goal is to finalise the FTA and enhance trade and investment flows, whereas the long-term goal is to establish a deeply integrated economic partnership, with supply chains and access to critical materials and technology, the EU spokesperson added.