The United Kingdom has included India’s Carbon Credit Trading Scheme (CCTS) in its indicative list of overseas carbon pricing mechanisms under the Carbon Border Adjustment Mechanism (CBAM). The Bureau of Energy Efficiency, under the Ministry of Power, received formal confirmation that the CCTS meets the criteria under the Carbon Border Adjustment Mechanism Regulations 2026.
Carbon Credit Trading Scheme
The Carbon Credit Trading Scheme is India’s market-based mechanism for reducing greenhouse gas emissions through tradable carbon credits. The scheme is linked to domestic carbon pricing and can be used by exporters to show that a carbon cost has already been paid in India.
Carbon Border Adjustment Mechanism
The Carbon Border Adjustment Mechanism is a border tax framework used to align the carbon cost of imported goods with the carbon cost faced by domestic producers. The UK CBAM is scheduled to begin on 1 January 2027 and applies to carbon-intensive imports.
Trade Relief and Covered Goods
Under the UK mechanism, importers of Indian goods can claim relief on CBAM liability for the effective carbon price already paid in India. The relief is relevant for iron, steel, aluminium, fertilisers, hydrogen, ceramics, glass, and cement.
Important Facts for Exams
- The Bureau of Energy Efficiency functions under the Ministry of Power in India.
- The UK’s HM Treasury is the finance and economic ministry of the United Kingdom.
- Carbon Border Adjustment Mechanism is a trade-related climate policy instrument used for imported goods.
- Partnership for Market Implementation is a platform linked to carbon market cooperation.
Verification Requirements
Indian exporters must satisfy UK verification rules by proving the embedded emissions in their products. They must also demonstrate that a carbon cost was actually borne in India to obtain tax relief.
India-UK Carbon Market Cooperation
The recognition follows technical-level negotiations on the design and implementation of the CCTS between the trade ministries of India and the United Kingdom. The two countries have also continued dialogue through the UK-India Energy Memorandum of Understanding and the Partnership for Market Implementation.
