As the UK prepares to implement its carbon border levy in 2027, India’s exporters face new compliance challenges amid ongoing trade negotiations and safeguarding measures, signalling a more complex decarbonisation era for bilateral trade.
India and the UK are already in talks over Britain’s planned carbon border levy, even as the two countries prepare to bring their free trade agreement into force on 15 July, according to Commerce Secretary Rajesh Agarwal.
Speaking to reporters, Agarwal said the Carbon Border Adjustment Mechanism is still being worked through and has not yet taken final shape. The UK government has said the policy will begin on 1 January 2027 and will apply an import carbon price to carbon-intensive goods, including iron and steel, aluminium, fertiliser, hydrogen, ceramics, glass and cement.
For Indian exporters, the stakes are material. Economic think tank GTRI has estimated that about $775 million of Indian exports to the UK could be affected, while India’s shipments of iron and steel and related products to Britain were worth $893.4 million in 2025-26, out of total merchandise exports of $13.4 billion.
The UK has cast CBAM as a tool to prevent carbon leakage by ensuring imported products face a carbon cost comparable with that paid by domestic manufacturers. It will make Britain the second economy after the European Union to introduce such a regime.
The issue was already a live one during negotiations on the India-UK trade pact, with New Delhi seeking to protect market access for domestic industry. Agarwal said India had preserved the value of access it has enjoyed so far in the steel sector, adding that its quotas are relatively more favourable than those offered to some other UK trading partners.
That outcome matters because the UK’s steel safeguard measures have been tightened. Announced in March, they cut duty-free import quotas by 60 per cent from 1 July and impose a 50 per cent tariff on shipments above the limit, up from 25 per cent previously. According to Agarwal, about 85 per cent of India’s steel exports to the UK were already outside those rules, while the rest have now been covered through a combination of country-specific and residual quotas under the bilateral agreement.
The safeguards applied to 188 product lines worth $137 million in Indian steel exports to Britain, but those items will also gain access under the trade deal. For manufacturers and exporters watching the decarbonisation of trade policy, the parallel emergence of CBAM and tighter safeguard measures in the UK signals a more complex compliance and market-access environment ahead.
- https://www.business-standard.com/economy/news/india-uk-engaged-in-discussions-on-carbon-tax-issue-commerce-secy-126071401329_1.html – Please view link – unable to able to access data
- https://www.gov.uk/government/publications/carbon-border-adjustment-mechanism-cbam-policy-summary/carbon-border-adjustment-mechanism-cbam-policy-summary – The UK government has announced the implementation of the Carbon Border Adjustment Mechanism (CBAM) starting on 1 January 2027. This policy aims to ensure that imported carbon-intensive products face a comparable carbon price to that paid by UK manufacturers, thereby preventing carbon leakage and supporting global emissions reduction efforts. The mechanism will apply to specified goods imported into the UK, including sectors such as iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass, and cement. The CBAM charge will be payable by the importer, who must register with HMRC if they meet or exceed the minimum registration threshold of £50,000 for CBAM goods imported over a given period. The first accounting period for CBAM will begin on 1 January 2027 and end on 31 December 2027, with the deadline for filing returns and paying any CBAM due being 31 May 2028. This initiative positions the UK as the second economy, after the European Union, to implement a CBAM, reflecting a significant step in global efforts to address carbon emissions in international trade.
- https://www.gov.uk/government/collections/carbon-border-adjustment-mechanism – The UK government has established a collection of information regarding the Carbon Border Adjustment Mechanism (CBAM), set to commence on 1 January 2027. This mechanism is designed to impose a carbon price on specified imported goods, ensuring that products from outside the UK face a comparable carbon price to that paid by domestic manufacturers. The CBAM will initially focus on sectors such as iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass, and cement. The collection includes policy summaries, factsheets, consultations, and draft regulations related to CBAM, providing comprehensive resources for businesses and stakeholders to understand and prepare for the forthcoming changes. The implementation of CBAM is part of the UK’s broader strategy to prevent carbon leakage and support global efforts in reducing emissions, aligning with the country’s commitment to achieving net-zero emissions.
- https://www.gov.uk/government/publications/introduction-of-carbon-border-adjustment-mechanism/carbon-border-adjustment-mechanism – The UK government has introduced the Carbon Border Adjustment Mechanism (CBAM), set to take effect on 1 January 2027. This policy aims to address carbon leakage by imposing a carbon price on specified imported goods, ensuring that products from outside the UK face a comparable carbon price to that paid by domestic manufacturers. The CBAM will initially cover sectors such as iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass, and cement. The introduction of CBAM follows consultations and legislative processes, including the Finance Act 2025, which provided the framework for its implementation. The mechanism is designed to support the UK’s decarbonisation efforts and align with global initiatives to reduce emissions in international trade.
- https://www.gov.uk/government/publications/factsheet-carbon-border-adjustment-mechanism-cbam/factsheet-carbon-border-adjustment-mechanism – The UK government has published a factsheet detailing the Carbon Border Adjustment Mechanism (CBAM), which is set to commence on 1 January 2027. The factsheet outlines the rationale behind CBAM, its scope, and the sectors and products initially in scope, including iron, steel, aluminium, fertiliser, hydrogen, ceramics, glass, and cement. It also provides information on calculating CBAM liability, determining embodied emissions, setting CBAM rates, and adjusting for overseas carbon prices. The document serves as a comprehensive guide for businesses and stakeholders to understand the implications of CBAM and prepare for its implementation, ensuring that imported goods from outside the UK face a comparable carbon price to that paid by domestic manufacturers.
- https://www.icaew.com/insights/tax-news/2026/feb-2026/carbon-border-adjustment-mechanism-begins-to-take-shape – The UK government’s Carbon Border Adjustment Mechanism (CBAM) is beginning to take shape, with draft regulations for technical consultation published in February 2026. Set to commence on 1 January 2027, CBAM will impose a carbon price on specified goods imported into the UK, including sectors such as aluminium, cement, fertiliser, hydrogen, and iron and steel. The charge will be payable by the importer, who must register with HMRC if they meet or exceed the minimum registration threshold of £50,000 for CBAM goods imported over a given period. The first accounting period for CBAM will begin on 1 January 2027 and end on 31 December 2027, with the deadline for filing returns and paying any CBAM due being 31 May 2028. This development reflects the UK’s commitment to addressing carbon emissions in international trade and preventing carbon leakage.
Noah Fact Check Pro
The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
8
Notes:
The article was published on July 14, 2026, and reports on recent discussions between India and the UK regarding the UK’s planned Carbon Border Adjustment Mechanism (CBAM). Similar reports have appeared in other reputable sources, such as The Economic Times, indicating that the information is current and not recycled. However, the article references a UK government announcement from December 2023, which may not be recent. ([economictimes.indiatimes.com](https://economictimes.indiatimes.com/news/economy/foreign-trade/india-uk-engaged-in-discussions-on-carbon-tax-issue-commerce-secretary/articleshow/132392655.cms?utm_source=openai))
Quotes check
Score:
7
Notes:
The article includes direct quotes from Commerce Secretary Rajesh Agarwal. While these quotes are consistent with statements attributed to him in other sources, such as The Economic Times, the exact wording cannot be independently verified. ([economictimes.indiatimes.com](https://economictimes.indiatimes.com/news/economy/foreign-trade/india-uk-engaged-in-discussions-on-carbon-tax-issue-commerce-secretary/articleshow/132392655.cms?utm_source=openai))
Source reliability
Score:
8
Notes:
The article is published by Business Standard, a reputable Indian news outlet. However, it is important to note that Business Standard is a commercial entity, and its reporting may be influenced by business interests. ([business-standard.com](https://www.business-standard.com/economy/news/india-uk-engaged-in-discussions-on-carbon-tax-issue-commerce-secy-126071401329_1.html?utm_source=openai))
Plausibility check
Score:
9
Notes:
The claims made in the article align with known developments in India-UK trade relations, including the UK’s planned CBAM and the India-UK Comprehensive Economic and Trade Agreement (CETA). The figures provided, such as India’s steel exports to the UK being around $900 million in FY26, are plausible and consistent with available data. ([business-standard.com](https://www.business-standard.com/economy/news/india-s-duty-free-steel-exports-to-uk-likely-to-be-around-1-bn-annually-126071401198_1.html?utm_source=openai))
Overall assessment
Verdict (FAIL, OPEN, PASS): PASS
Confidence (LOW, MEDIUM, HIGH): MEDIUM
Summary:
The article provides current information on India-UK discussions regarding the UK’s planned CBAM, with details consistent across multiple reputable sources. However, the reliance on statements from government officials and the commercial nature of the source introduce potential biases. Independent verification from neutral third-party sources is limited, which affects the overall confidence in the content’s accuracy.
