India’s carbon credit scheme gets UK nod: What it means for exporters | Economy & Policy News

The UK has recognised India’s Carbon Credit Trading Scheme (CCTS) as a qualifying carbon pricing mechanism under its Carbon Border Adjustment Mechanism (CBAM). The move could lower the carbon-related tax burden on Indian exporters selling carbon-intensive goods in the UK.

What does the recognition mean for Indian exporters?

Under the UK’s rules, importers bringing eligible Indian goods covered by CBAM into the country can claim relief for the effective carbon price already paid on those goods under India’s CCTS.

This means Indian exporters could avoid bearing the full carbon cost again when their products enter the UK.

“This will reduce the effective CBAM liability on Indian goods, directly benefiting Indian exporters to the UK,” an official told news agency PTI.

Why is the move important for India?

The recognition could help prevent Indian exporters from facing carbon costs twice — first under India’s carbon pricing system and again under the UK’s CBAM.

For Indian producers of these goods, the UK’s recognition of the CCTS could therefore lower their effective CBAM liability. The benefit will depend on the carbon price actually paid in India and whether exporters can meet the UK’s documentation and verification requirements.

The UK plans to implement its CBAM from 2027.

How does India’s Carbon Credit Trading Scheme work?

India introduced the CCTS to put a price on greenhouse gas emissions and encourage industries to reduce, avoid or remove such emissions.

The scheme allows carbon credits to be traded through Carbon Credit Certificates. It is designed to create a market-based system that encourages businesses to cut their emissions.

The Bureau of Energy Efficiency will meet the financial requirements for implementing the scheme through fees collected from entities covered by it, along with its own resources.

Recognition follows India-UK technical discussions

The decision follows technical-level discussions between the two countries on the design and implementation of India’s carbon market.

It is also in line with the UK’s approach of allowing relief where imported goods have already been subject to an eligible carbon price in their country of origin. This is intended to avoid imposing the same carbon cost twice.

India-UK trade ties

India and the UK signed the Comprehensive Economic and Trade Agreement (CETA) on July 15 this year. Merchandise trade between the two countries stood at $25.1 billion in 2025-26, while bilateral services trade reached $35.4 billion in 2024.

Under the agreement, a key benefit for India is the UK’s decision to eliminate import duties on several major product categories.

Duties of up to 70 per cent on processed food, 21.5 per cent on marine products, 18 per cent on engineering goods and auto components, 16 per cent on leather and footwear, 12 per cent on textiles and garments, and 8 per cent on chemicals and pharmaceuticals will be brought down to zero.

However, India has protected several sensitive sectors from the agreement. These include dairy products, cereals, millets, edible oils, oilseeds, apples and a range of vegetables.