Will the India-EU Free Trade Agreement Address Rising Export Costs Due to Carbon Tax?

The Congress party has voiced concerns regarding the impact of the European Union's carbon tax on Indian exports, particularly steel and aluminum. With the India-EU Free Trade Agreement set to be finalized soon, Jairam Ramesh emphasizes the need for the agreement to address these rising costs. As exporters face potential price cuts and increased documentation requirements, the implications of the carbon tax could significantly affect trade dynamics. This article delves into the challenges posed by the carbon tax and the anticipated outcomes of the upcoming FTA.

By Narendra Chaudhary Jan 1, 2026, 16:42 IST

Concerns Over Export Costs Amid New Carbon Tax

New Delhi: On Thursday, the Congress party expressed its worries regarding the increasing export costs linked to the European Union's carbon tax. They emphasized that the upcoming India-EU Free Trade Agreement (FTA), expected to be finalized this month, must address this significant non-tariff barrier.

Jairam Ramesh, the Congress general secretary, highlighted that starting Thursday, Indian exporters of steel and aluminum will be subjected to a carbon tax as part of the EU's Carbon Border Adjustment Mechanism (CBAM).

In the fiscal year 2024-25, India's steel and aluminum exports to the EU were valued at approximately USD 5.8 billion, a decline from USD 7 billion the previous year, as EU importers began to prepare for the CBAM's implementation.

Ramesh referenced estimates from the think tank GTRI, indicating that many Indian exporters might need to reduce their prices by 15-22% to allow EU importers to cover the carbon tax costs.

Moreover, the stringent documentation requirements necessitate detailed tracking and reporting of carbon emissions, which further escalates expenses for Indian exporters.

Ramesh insisted that any finalized India-EU FTA must take into consideration this unacceptable non-tariff barrier.