Keeping India’s carbon money at home

On January 1, 2026, the European Union (EU)’s Carbon Border Adjustment Mechanism (CBAM) came into effect, and is fully in force. Europe calls it fairness: European producers pay a carbon price, so imports should too. On paper, it sounds equitable; in practice, the door to fair competition is only half-open for India.

European steel, aluminium and cement producers enjoy large decarbonisation subsidies and subsidised public finance. They also continue receiving free allowances under the EU Emissions Trading System, which will be phased out gradually from 2026 to 2034, lowering their effective carbon costs even as CBAM phases in. Indian exporters, by contrast, face the full weight of CBAM charges without equivalent state support.