India-EU FTA has provisions to address carbon tax issues: Official

There is a comprehensive work plan under the India-EU free trade agreement to address concerns over the European Union’s carbon tax, a senior government official said on Thursday, expressing hope that domestic small and medium enterprises will not face any problems due to that measure.

Additional Secretary in the Depaartment of Commerce Darpan Jain said there are provisions, such as extension of flexibility to India by the EU, if the 27-nation bloc extends relaxation to other countries.

CBAM (carbon border adjustment mechanism) took a lot of negotiating capital. In the text, there is a separate Annexure on dealing with CBAM, and there are certain pillars. “The first pillar is that, in case of flexibility in future, that will be available to India. So there is an obligation in that”, he said.

“Second, CBAM compliances are a concern among SMEs in terms of verification, in terms of finding out what is the value of embedded carbon, in terms of ensuring that the verifiers are recognised by the EU authorities.

“So, there are separate provisions, and we also have a provision in which we can engage with EU authorities on taking into account the carbon price, which is paid in India. As you would know, India also is developing its own carbon pricing mechanism. So, how to offset what is paid in India from what is paid in Europe, so even that is part of it,” Jain noted.

He was speaking at the IGCC (Indo-German Chamber of Commerce) Industry Dialogue 2026 here.