- The UK has recognized India’s Carbon Credit Trading Scheme for CBAM pricing relief from 2027
- UK importers of eligible Indian goods can seek carbon price relief under the CBAM regulations
- Recognition aims to avoid double taxation on Indian exports subject to carbon pricing in India
In a major breakthrough win for exporters, the UK has recognised India's Carbon Credit Trading Scheme as a qualifying criterion for pricing relief under its carbon border adjustment mechanism (CBAM). The move would reduce the tax burden on domestic exporters. Commerce Ministry told NDTV Profit Indian exporters to UK are set to get lower CBAM liability. UK importers can seek carbon price relief for eligible Indian goods. The relief to apply to carbon price already paid under India's CCTS. The move aims to avoid double taxation on Indian exports, sources added.
India-UK will continue talks on carbon pricing and CCTS-UK CBAM link. In a communication to the Bureau of Energy Efficiency, Ministry of Power, UK's HM Treasury confirmed that the CCTS has been included in UK's published indicative list of overseas carbon pricing schemes assessed as qualifying criteria under a provision of the Carbon Border Adjustment Mechanism (Calculation of CBAM Rate and Determination of Carbon Price Relief) Regulations 2026, said an official, according to news agency PTI.
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The Carbon Credit Trading Scheme (CCTS) has been notified by India with the objective of reducing, removing, or avoiding greenhouse gas emissions from the Indian economy by pricing such emissions through the trading of Carbon Credit Certificates. The financial support for implementation of the CCTS would be met by the Bureau of Energy Efficiency from fees and charges collected from entities under the scheme and its own resources. The UK government has included the scheme in its indicative list as a qualifying carbon pricing mechanism under Britain's CBAM, according to PTI.
With this recognition, UK importers of eligible Indian goods covered under CBAM will be able to seek carbon price relief corresponding to the effective carbon price borne by those goods under the CCTS, subject to satisfying the evidence and verification requirements prescribed under UK law. The recognition follows sustained technical-level engagement between the two governments on the design and implementation of the CCTS. The recognition reflects the UK CBAM's core principle of avoiding double taxation on goods that have already borne an eligible carbon price in their country of origin.
Going forward, cooperation on carbon market design and implementation will continue through the UK-India Energy Memorandum of Understanding and the Partnership for Market Implementation. The two governments are also committed to continued dialogue on carbon pricing, including on the interaction between the CCTS and UK CBAM rules, strengthening the India-UK engagement. However, the amount of relief that can be claimed will depend on the effective carbon price to which the goods in question have been subject. India and UK implemented a comprehensive economic and trade partnership on July 15.
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The UK government in December 2023 decided to implement CBAM, or carbon tax, starting in 2027. Under this, importers of certain carbon-intensive products such as iron and steel have to pay a charge in the UK based on the carbon emissions linked to those goods. According to experts, certain India's exports to the UK may be impacted due to Britain's decision to introduce a carbon tax on products like iron and steel, aluminium, fertiliser, hydrogen, ceramic, glass and cement, from 2027.
India has notified the CCTS, under which domestic firms can face a carbon-related cost. The UK government has recognised this scheme. Recognition could help avoid charging carbon tax on the same product twice. This means that if the carbon price paid in India qualifies, the UK can give relief for that amount when calculating the UK CBAM liability, according to PTI.
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