EU carbon rules are reshaping exports
A wave of new climate laws this legislative cycle is forcing companies to rethink costs and competitiveness — the Oxford Climate Policy Monitor flags a “cascade” of landmark updates in 2025–2026 that are already changing regulatory expectations. The EU’s Carbon Border Adjustment Mechanism is now putting acute pressure on India’s energy‑intensive exporters, who face a stark choice: adapt domestic carbon pricing and market design or risk losing access to key European markets. (mondaq.com) (vishnuias.com)
The EU’s Carbon Border Adjustment Mechanism moves from its transitional phase (2023–2025) into its definitive regime on 1 January 2026. (taxation-customs.ec.europa.eu) On 17 December 2025 the European Commission published a package of 11 implementing and delegated acts plus 13 technical annexes to define the CBAM definitive rules. (taxnews.ey.com) The CBAM’s current product scope explicitly covers cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. (iisd.org) The definitive regime requires mandatory embedded‑emissions reporting, third‑party verification and financial adjustments for importers from 2026, while Regulation (EU) 2025/2083 — adopted 8 October 2025 and in force 20 October 2025 — introduced a de‑minimis exemption and other administrative simplifications. (encarbonsys.com) Indian studies estimate CBAM‑exposed exports to the EU at roughly 0.2% of India’s GDP, with iron and steel constituting about 90% of those exposed shipments. (hindustantimes.com) India’s Carbon Credit Trading Scheme (CCTS) has set GHG emission‑intensity targets for the 2025–26 and 2026–27 compliance years using 2023–24 baselines, and draft rules describe market architecture covering nine industrial sectors. (downtoearth.org.in) Policy modelling for India contrasts a domestic carbon tax (PCARBON) and a hybrid PCARBON+CBAM design, finding that retaining carbon‑pricing revenue domestically reduces competitiveness losses for energy‑intensive exporters. (csep.org) Trade analysts and the IISD report the EU is already preparing to expand CBAM’s scope beyond the initial product list, a move that would broaden compliance obligations and supply‑chain exposure for exporters worldwide. (iisd.org)
