T&A Consulting

India’s Carbon Market Goes Live: What UK Recognition of the CCTS Means for CBAM-Exposed Exporters and Investors

In early September 2026, HM Treasury confirmed that India’s Carbon Credit Trading Scheme (CCTS) has been included in the UK’s indicative list of overseas carbon pricing schemes that qualify for relief under its Carbon Border Adjustment Mechanism (CBAM), placing India alongside the EU Emissions Trading System, China’s national ETS, Japan’s GX-ETS and South Korea’s ETS. The recognition arrives as India’s Bureau of Energy Efficiency prepares to issue the first Carbon Credit Certificates in October 2026, with trading expected between November 2026 and January 2027, and less than three months before the UK CBAM takes effect on 1 January 2027. With an estimated $775 million of Indian iron, steel, aluminium, fertiliser and cement exports to the UK facing a potential levy of 14-24%, and the EU CBAM already in its financially binding phase, carbon pricing has become a core question of trade competitiveness. T&A Consulting helps exporters, trade promotion bodies and foreign investors navigate carbon border measures and India’s carbon market to protect market access and identify decarbonisation investment opportunities.

Introduction: When Climate Policy Becomes Trade Policy

For most of the past decade, carbon pricing was discussed in India as a domestic climate instrument. Carbon border adjustments have changed that. The EU’s CBAM moved from a reporting-only transitional phase to a regime linked to actual payments on 1 January 2026, with the first annual declaration and certificate surrender due in 2027. The UK will introduce its own CBAM a year later, covering aluminium, cement, fertiliser, hydrogen, and iron and steel. Both mechanisms allow a deduction for carbon prices already paid in the country of production, which means the design and credibility of India’s domestic carbon market now directly determine the cost of Indian exports in two of its most important developed markets.

The timing is significant for the India-UK corridor. The India-UK Comprehensive Economic and Trade Agreement (CETA) entered into force on 15 July 2026, giving duty-free access to around 99% of Indian tariff lines, but it contains no carve-out from the UK CBAM. India secured a note verbale reserving the right to rebalance concessions if CBAM erodes its gains, and the Global Trade Research Initiative estimated in 2025 that Indian exports worth $775 million could face a carbon tax of 14-24%. UK recognition of the CCTS is the first concrete mechanism for reducing that exposure.

It is also a milestone for the CCTS itself. Khaitan & Co characterised the decision as a formal recognition of India’s compliance carbon market by a major trading partner, and India and the UK will continue cooperation on carbon market design through the UK-India Energy Memorandum of Understanding and the Partnership for Market Implementation.

How the CCTS Works in 2026

The CCTS was notified on 28 June 2023 under the Energy Conservation (Amendment) Act, 2022, and replaces the Perform, Achieve and Trade scheme with an emissions-based system administered by the Bureau of Energy Efficiency.

  • Intensity-based compliance targets. Obligated entities must meet greenhouse gas emission intensity targets, measured per unit of output, rather than an absolute cap. Entities that outperform earn Carbon Credit Certificates, each representing one tonne of CO2 equivalent, which they can sell to entities that fall short.
  • Sectoral coverage. Targets were notified in October 2025 for 282 entities in aluminium, cement, chlor-alkali and pulp and paper, and on 13 January 2026 for 208 entities in petroleum refining, petrochemicals, textiles and secondary aluminium. The compliance mechanism now covers 490 obligated entities.
  • Issuance and trading timeline. The Bureau of Energy Efficiency plans to issue the first certificates in October 2026, with trading on the power exchanges expected between November 2026 and January 2027, and the cycle repeating annually. Unused certificates can be banked for later compliance cycles.
  • Offset mechanism. A parallel voluntary track allows non-obligated entities to register emission reduction or removal projects. By 7 July 2026, the Bureau had approved 12 offset methodologies, and the Indian Carbon Market Portal now provides registration, verification and issuance infrastructure.

What UK Recognition Does, and What It Does Not Do

The recognition is valuable, but exporters should read it carefully. Under the UK’s Carbon Border Adjustment Mechanism (Calculation of CBAM Rate and Determination of Carbon Price Relief) Regulations 2026, a UK importer’s CBAM liability on eligible Indian goods can be reduced by the effective carbon price already borne under the CCTS, subject to UK evidence and verification requirements.

  • Relief is proportionate, not automatic. The deduction reflects the carbon price actually paid. Under an intensity-based scheme in its first year, with certificate prices yet to be discovered, the effective carbon price for many Indian producers may be well below UK ETS levels, leaving a substantial residual liability.
  • Sector coverage gaps matter. Iron and steel and fertilisers, two of the most important UK CBAM categories for India, were not among the sectors with notified CCTS targets as of the January 2026 notification. Until targets are set for these sectors, producers may have little or no qualifying carbon price to claim against.
  • Evidence is the binding constraint. Relief depends on plant-level emissions data and documentation of carbon costs that satisfy UK verification rules. Large integrated producers are better placed than MSMEs, many of which source steel and aluminium from larger suppliers without receiving verified emissions data.
  • A precedent for other markets. As Khaitan & Co notes, a larger share of India’s carbon-intensive exports goes to the EU than to the UK, so EU recognition would be the bigger prize. The UK decision gives India a reference point for those negotiations.

The EU Front: Higher Stakes, No Recognition Yet

The EU remains India’s largest CBAM exposure. Analysis by the think-tank Sandbag estimated that Indian exporters of iron and steel could pay around EUR 301 million (approximately Rs 3,000 crore) in CBAM fees, the highest of any country exporting similar products to the EU, with total liability across iron and steel, aluminium and cement of about EUR 330 million. India’s steel and aluminium exports to the EU fell 24.4% in FY 2024-25 as buyers anticipated the regime, and GTRI has warned that exporters may need to accept price reductions of 15-22% to retain market access.

The scope is also set to widen. A draft report released on 10 April 2026 suggests the EU CBAM will likely extend to around 180 additional downstream steel and aluminium products from 1 January 2028. The India-EU FTA, concluded on 27 January 2026 and sent by the European Commission to the Council for signature on 11 September 2026, does not by itself resolve CBAM exposure. For Indian exporters, the practical response is the same in both markets: credible emissions data, a domestic carbon price that qualifies for deduction, and a decarbonisation pathway that reduces embedded emissions over time.

Implications for Exporters, Investors and Agencies

  • Indian exporters in CBAM sectors. Build plant-level monitoring, reporting and verification systems now, prepare standardised CBAM data packs for each facility and adopt an internal shadow carbon price aligned with EU and UK benchmarks. Exporters should work with UK importers to document CCTS costs in the form HM Treasury will accept.
  • UK and EU importers. Supplier selection is shifting towards carbon intensity. Importers should identify Indian suppliers with verified emissions data and CCTS participation, and build carbon cost allocation into contract terms.
  • Foreign investors and technology providers. India’s carbon market creates demand for verification bodies, MRV software, energy efficiency solutions, electric arc furnace technology, low-carbon aluminium and green hydrogen. Foreign firms with proven decarbonisation technology can partner with Indian producers seeking to protect export margins.
  • UK economic development agencies. Indian steel, aluminium and chemicals groups already hold significant UK footprints. Agencies can position UK locations for low-carbon processing, research partnerships and green manufacturing investment that complements CETA access.
  • Indian export promotion councils and state IPAs. MSMEs need practical support to generate verified emissions data. Councils and state agencies should establish CBAM help desks, shared verification services and financing for energy audits, so smaller exporters are not priced out of European markets by compliance costs rather than product quality.

How T&A Consulting Supports CBAM Readiness and Carbon Market Strategy

T&A Consulting combines India-UK corridor expertise with trade promotion and investment advisory experience across Europe and Asia:

  • CBAM exposure assessments. We map product-level exposure to EU and UK CBAM, model potential liabilities under different carbon price scenarios and identify where CCTS participation can reduce costs.
  • Exporter readiness programmes. We design CBAM readiness programmes for export promotion councils and industry associations, covering data requirements, verification pathways and buyer communication.
  • Decarbonisation partnerships. We connect Indian producers with UK and European technology providers, verifiers and financiers to build credible decarbonisation pathways that protect export competitiveness.
  • India market entry for climate technology firms. We advise foreign MRV, energy efficiency and clean industrial technology companies on entity structure, regulatory requirements and partner selection in India.
  • Investment attraction for UK and EU agencies. We help economic development agencies identify Indian companies seeking low-carbon manufacturing and processing locations to serve European customers.

The UK’s recognition of India’s carbon market is a turning point: for the first time, a tonne of carbon priced in India can reduce the cost of selling into a major developed market. The exporters that measure, verify and reduce their emissions first will turn carbon border measures from a threat into a competitive advantage.

Contact us at: pnijhawan@taglobalgroup.com to assess your CBAM exposure and build a carbon-ready export and investment strategy for the UK and EU.

Sources & references:
All India Radio: UK recognises India’s carbon credit scheme under its CBAM, Khaitan & Co: UK recognition of India’s CCTS, Business Standard: Govt notifies GHG emission intensity targets for four industries, Outlook Business: India reserves right to reciprocate if UK CBAM impacts FTA gains, AL Circle: CBAM, a challenge for European importers or a price for Indian exporters?, Outlook Business: India to launch first carbon trading programme by October 2026