India misses carbon tax exemption in UK FTA: GTRI

India has not been able to secure an exemption from the UK’s carbon border tax in the recently signed free trade agreement (FTA), a move that could significantly impact India’s carbon-intensive exports, according to the Global Trade Research Initiative (GTRI).
The UK government announced in December 2023 that it would implement a Carbon Border Adjustment Mechanism (CBAM) from 2027, similar to the European Union’s policy. Under this mechanism, taxes will be imposed on imports of carbon-intensive products to offset emissions and promote climate goals.
“By not securing a carve-out or exemption clause on CBAM, India lost a vital opportunity to protect its carbon-intensive exports,” stated Ajay Srivastava, founder of GTRI. He warned that from January 2027, the UK can levy carbon taxes on Indian steel and aluminum exports, even as Indian markets provide duty-free access to British goods.
Impact on Indian Exports
According to GTRI, India’s exports worth USD 775 million to the UK could be affected. The products include iron and steel, aluminum, fertilizers, hydrogen, ceramics, glass, and cement—with potential tax rates ranging between 14% and 24%.The UK will become the second major economy after the EU to adopt CBAM. India had earlier flagged the carbon tax as a trade barrier and maintained that it could retaliate or rebalance trade concessions if such measures impact domestic exports.The development highlights a growing challenge for India in negotiating favorable trade terms, especially as similar provisions may feature in its ongoing FTA talks with the EU, Srivastava indicated.