New Delhi: The UK has recognised India's Carbon Credit Trading Scheme (CCTS) as meeting the qualifying criteria for carbon price relief under its Carbon Border Adjustment Mechanism (CBAM), an official said on Monday. The recognition will lower the tax burden carried by Indian exporters shipping to Britain, the official said.
Follow Energy Watch on X
HM Treasury conveyed the decision in a communication addressed to the Bureau of Energy Efficiency (BEE) under the Ministry of Power. According to the official, the CCTS has been placed on the UK's published indicative list of overseas carbon pricing schemes assessed as qualifying criteria under a provision of the Carbon Border Adjustment Mechanism (Calculation of CBAM Rate and Determination of Carbon Price Relief) Regulations 2026. The Commerce Ministry had been pursuing the matter with the UK over an extended period.
Importers in the UK bringing in eligible Indian goods covered by CBAM will now be able to seek relief corresponding to the effective carbon price those goods have already borne under the CCTS. That claim is conditional on satisfying the evidence and verification requirements prescribed under UK law.
"This will reduce the effective CBAM liability on Indian goods, directly benefiting Indian exporters to the UK," the official said.
How much can be claimed will not be uniform. The relief available turns on the effective carbon price to which the goods in question have actually been subject, and a liable person under the UK CBAM will still have to meet the applicable evidence and verification requirements.
India notified the CCTS with the objective of reducing, removing or avoiding greenhouse gas emissions from its economy by pricing those emissions through the trading of Carbon Credit Certificates. Domestic firms can face a carbon-related cost under the scheme, and it is that cost the UK has now agreed to count. The BEE will meet the financial support for implementing the CCTS from the fees and charges collected from entities covered by it, along with its own resources.
The recognition follows sustained technical-level engagement between the two governments on the design and implementation of the CCTS. It rests on a principle at the centre of the UK CBAM, which is that goods should not be taxed a second time for carbon they have already paid for in their country of origin. In practice that means the UK can set off a qualifying Indian carbon price when it calculates the CBAM liability on the same product.
Cooperation on carbon market design and implementation will continue through the UK-India Energy Memorandum of Understanding (MoU) and the Partnership for Market Implementation. The two governments have also committed to continued dialogue on carbon pricing, including on how the CCTS and the UK CBAM rules interact, which the official said would further strengthen India-UK engagement.
India and the UK brought a comprehensive economic and trade partnership into force on July 15. Merchandise trade between the two countries stood at USD 25.1 billion in 2025-26. Bilateral services trade reached USD 35.4 billion in 2024.
Follow Energy Watch on LinkedIN
Britain decided in December 2023 to introduce its CBAM from 2027. Under the mechanism, importers of certain carbon-intensive products pay a charge in the UK based on the carbon emissions linked to those goods. The products covered include iron and steel, aluminium, fertiliser, hydrogen, ceramic, glass and cement. Experts have said some Indian exports to the UK may be affected once the charge takes effect.