EU may not offer concessions to India for CBAM and Deforestation Regulation: Report

Several countries including India and China have criticised these rules, stating that they are trade barriers in the guise of reducing carbon emissions.

The European Union (EU) has hinted that India is unlikely to get relaxations when it comes to the union's carbon-border levy and deforestation regulation, according to a Business Standard report.

This photograph taken on February 18, 2025, shows the facade of the Berlaymont building, which houses the European Union Commission headquarters, and European Union flags, in Brussels. (AFP)

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This topic is also likely to come up for discussion during the meeting of Prime Minister Narendra Modi with Ursula von der Leyen, the President of the European Commission (The executive arm of the EU).

She will be in New Delhi from February 27 to 28, accompanied by the commissioners of 21 countries, marking the first of such visits to India.

The report quoted an unnamed senior trade-bloc official as saying that India’s concerns on the Carbon-Border Adjustment Mechanism (CBAM) are “illegitimate,” but that the bloc is ready to address them.

What is the CBAM and Deforestation Regulation?

The Carbon-Border Adjustment Mechanism (CBAM) is a carbon tax the EU will levy from January 1, 2026 on imported goods to encourage cleaner industrial production practises.

Meanwhile, the Deforestation Regulation is a new rule which dictates that products imported into the union must not come from land which has been deforested after December 31, 2020. It will come into effect from December 30 this year for large companies and from June 30, 2026, for small enterprises.

However, several countries including India and China have criticised these rules, stating that they are trade barriers in the guise of reducing carbon emissions.

The report quoted Ajay Srivastava, a former member of the Indian Trade Service and founder, Global Trade Research Initiative, as saying that once the CBAM and the Free-Trade Agreement (FTA) kicks in, goods from the EU would enter India duty-free, while Indian steel and aluminium could face high carbon charges there.

He added that this violated rules of the World Trade Organization (WTO), though the EU has said that the rules are actually compatible with WTO norms, according to the report.

India has thus, emphasised the need for a longer transition period before these regulations come into effect.