India is objecting to CBAM in every multilateral forum it can find, negotiating around it in every bilateral one, and losing export volume to it anyway — and the businesses caught in the middle are mostly small ones who don’t yet know it.

In this article:

• Why CCTS doesn’t yet offset a CBAM bill, despite hopeful headlines
• What India’s formal opposition to CBAM at BRICS changes (and doesn’t)
• What the India-EU FTA’s CBAM annexure actually grants exporters
• The trade damage already visible in steel and aluminium exports
• Why BRSR/SEBI disclosures don’t substitute for CBAM’s data requirements
• Next steps for Indian exporters, especially MSMEs

If you run an Indian business that makes or exports steel, aluminium, cement, or fertiliser — or supply a company that does — you’ve probably heard three contradictory things this year: that CCTS will offset your CBAM costs, that the new India-EU trade deal fixes the CBAM problem, and that India has firmly opposed CBAM at BRICS. All three are half-true, and the gap between what’s true and what’s hoped-for is where exporters are getting hurt.

A 20-second refresher on CBAM

The EU’s Carbon Border Adjustment Mechanism makes importers of steel, aluminium, cement, fertilisers, hydrogen, and electricity pay a carbon cost roughly equal to what EU manufacturers already pay under the EU’s carbon market. It moved from a reporting-only “learning phase” into its definitive, payment-owing period on January 1, 2026. From here, Indian exporters — or, technically, their EU-side importers — owe CBAM certificates tied to the carbon footprint of what they shipped, unless they can prove a lower number than the EU’s punitive default estimate.

The trade damage is not theoretical anymore

This is the part Indian business owners should sit with first, because it’s no longer a forecast. According to the Global Trade Research Initiative (GTRI), India’s combined steel and aluminium exports to the EU fell 24.4% in FY25, even before CBAM’s formal duty rollout — iron and steel alone fell 35.1%, to USD 3.05 billion. A separate ICRIER study projects steel exports to the EU could eventually fall 24% overall, and finds actual data already showing a 13% decline in the four months after the January 2026 payment-phase start. Aluminium shipments fell too — unwrought volumes to the EU dropped roughly 42% year-on-year, exceeding pre-CBAM projections. This matters structurally: the EU absorbs an estimated 32–45% of India’s total annual steel exports, one of the few markets Indian steelmakers can least afford to lose.

The cost side compounds the volume side. Carbon levies on Indian shipments have reportedly risen from roughly €70–80 to €240–300 per tonne, largely because exporters without verified emissions data get hit with the EU’s “default” values, which run 30–80% higher than actual emissions. A CSEP working paper on India’s energy-intensive exporters found a 10% rise in fuel costs associated with a 2.41% drop in export earnings, with cement hit hardest (a 6.7% profit decline) and steel close behind. This is the mechanism working as designed — landing hardest on the supplier country with the least carbon-pricing infrastructure already in place.

A timeline of the policy developments shaping India’s CBAM exposure through 2026.

CCTS is real — but it does not offset your CBAM bill yet

India’s Carbon Credit Trading Scheme (CCTS) became operational on April 1, 2025, and now covers nine energy-intensive sectors including iron & steel, aluminium, cement, and fertilisers, with roughly 490 entities under binding emission-intensity targets. It’s a genuine, fast-moving piece of infrastructure — the Indian Carbon Market Portal launched in March 2026, and certificate trading on regulated exchanges is expected around mid-2026. But a lot of hopeful commentary conflates “India now has a carbon market” with “India’s carbon costs now count against CBAM.”

Those are not the same thing yet. CBAM’s own rules do allow a carbon price paid in the country of origin to be deducted from the bill — in principle, verified CCTS costs could someday be credited this way. But the primary regulatory documentation for CCTS makes no mention of an automatic CBAM offset; it describes CCTS as an independent domestic scheme. Even if recognition happens, the math is discouraging: India’s implicit carbon price is estimated at under USD 10 per tonne of CO2, against an EU benchmark near USD 71 — a gap CCTS participation alone doesn’t close. Registering for CCTS is good practice. Treating it as a CBAM discount today is not.

Opposing CBAM loudly, negotiating around it quietly

India’s official position, held consistently at the WTO and reaffirmed on August 18, 2026, when BRICS environment ministers meeting in New Delhi under India’s chairship jointly called CBAM “unilateral, punitive, discriminatory and protectionist,” is that the mechanism unfairly shifts climate costs onto developing-country exporters, citing India’s own steel export decline as evidence. The European Commission has pushed back publicly, defending CBAM as necessary to prevent carbon leakage.

That formal opposition hasn’t stopped India from negotiating hard on the bilateral track. The India-EU FTA text, published around February 27, 2026, is explicit that CBAM “will remain fully applicable” to Indian goods — no carve-out. What it does add is a dedicated CBAM annexure, confirmed by the Ministry of Commerce in July 2026: a formal dialogue channel with the EU on how CBAM applies in practice and on eventually recognizing India’s domestic carbon-pricing costs; reduced verification burdens for SMEs, including recognition of EU-authorised verifiers to lower audit costs; and clearer rules for calculating embedded-carbon values. Commerce Minister Piyush Goyal has defended the deal as protecting exporters’ interests through “dialogue, trust and cooperation” rather than confrontation.

That’s a real, practical win — especially the SME relief — but it’s a process improvement, not a discount. Every exporter still owes the full CBAM obligation; they simply have a better channel to argue their case, and a lighter audit path if small. Conflating “dialogue mechanism” with “exemption” is the costliest misreading of this deal I’m hearing from Indian manufacturers right now.

Why your BRSR filing won’t save you

Indian sustainability teams sometimes assume that because their company already reports emissions under SEBI’s BRSR Core framework — now mandatory for the top 500 listed entities and expanding to the top 1,000 by FY2026-27 — they’re most of the way to CBAM-ready. They aren’t.

A company can have an excellent BRSR score and still get hit with punitive default emissions values on every shipment, simply because it has never produced a verified, plant-level, product-specific carbon footprint. The three regimes are complementary, not interchangeable: BRSR satisfies investors, CCTS builds domestic carbon-pricing infrastructure, and CBAM demands its own separate, shipment-level evidence trail that neither of the other two provides.

The exposure is concentrated — and MSMEs carry a disproportionate share of it

The sharpest version of this problem sits in India’s MSME steel re-rolling clusters in Punjab, Gujarat, and Tamil Nadu — roughly 1,200 small and mid-sized mills producing an estimated 33 million tonnes a year, most still running coal-based sponge iron or direct reduced iron (DRI) rather than electric arc furnaces. Coal reportedly accounts for nearly 59% of energy consumption in these mills, and a shift to scrap-based EAF production is capital-intensive and constrained by India’s dependence on imported scrap — exactly the production profiles that score worst against CBAM’s benchmarks.

The scale is easy to underestimate: an estimated 25,000–30,000 MSMEs are exposed indirectly through EU-bound supply chains, alongside 3,000–4,000 that export directly. In January 2026 alone, at least ten Indian consignments were seized at European ports for missing carbon declarations, and one Kolkata fastener manufacturer had a 7,000-tonne order cancelled after CBAM costs rose by an estimated ₹5–6 crore. As one sustainability-tech founder put it: a workshop with 15 workers now has to meet the same reporting standard as a billion-dollar steelmaker. A 50-tonne de minimis exemption offers today’s smallest shippers breathing room, but the EU is expected to tighten it after 2026 — it is not permanent shelter.

What to do now

If you export steel, aluminium, cement, or fertiliser to the EU — or supply someone who does — three things are worth doing this quarter. First, confirm whether your product’s HS code sits inside CBAM’s scope, and start collecting installation-level emissions data now rather than waiting for a buyer to demand it. Second, register for CCTS if your sector requires it — not because it discounts your CBAM bill today, but because the discipline it forces is what CBAM verification will eventually require anyway. Third, if you’re an MSME, look at the FTA’s reduced-verification-burden provisions — real near-term relief that many eligible exporters don’t yet know exists.

How Sprih Helps

The pattern across every part of this story — CCTS, BRSR, CBAM — is the same: Indian exporters keep discovering that the emissions data they already have isn’t the emissions data the next regulator or buyer actually needs. That’s a supply-chain data problem before it’s a compliance problem, and it’s the one Sprih was built to solve.

Our platform, SustainSense, indexes emissions and sustainability data across 120,000+ companies and 400,000+ reports, giving Indian exporters and their EU-side buyers a shared, verifiable source of truth instead of relying on punitive EU default values. We’re also building CBAM-specific tooling to help importers and their Indian suppliers calculate and manage embedded-emissions data directly, so a shipment doesn’t get priced as if it came from the least efficient mill in the country. If your export book touches steel, aluminium, cement, or fertiliser, it’s worth finding out where your actual exposure sits before your buyer tells you.

Sprih is an AI-native sustainability intelligence company helping enterprises turn climate and compliance data into competitive advantage.