With this recognition, British importers of eligible Indian goods covered under the UK Carbon Border Adjustment Mechanism (CBAM) will be able to seek carbon price relief corresponding to the effective carbon price borne by those goods under the CCTS, thereby reducing the CBAM liability on Indian goods and directly benefiting Indian exporters.
Officials said the move will govt help New Delhi make a fresh bid for a similar dispensation in its trade deal with the EU.
“The recognition follows sustained technical-level engagement between the two governments on the design and implementation of the CCTS,” said an official. India had been trying to include carbon tax in the trade negotiations but the UK authorities did not agree to the proposal at that time. The India-UK Comprehensive Economic and Trade Agreement came into force July 15, 2026.
The UK CBAM is scheduled to come into force January 1, 2027 when a carbon price on the emissions embodied in imports of specified goods in aluminium, cement, fertiliser, hydrogen, and iron and steel would be placed.
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, as per the official.
The amount of relief available will depend on the effective carbon price actually paid on the embedded emissions of the imported goods.
The UK currently recognizes 16 qualifying carbon pricing schemes, including the EU Emissions Trading System (ETS), China’s national ETS, India’s Carbon Credit Trading Scheme (CCTS), South Korea’s K-ETS, Japan’s GX-ETS and Australia’s Safeguard Mechanism. The list also includes carbon pricing systems in Canada, Chile, Kazakhstan, Montenegro, New Zealand, Serbia, Singapore, South Africa, Switzerland and Taiwan.