India has no shortage of climate policy. What it lacks, two commentators argue in Mint, is a way to get trade partners to count it.
The opinion piece, published July 5 by a Mumbai-based economist and a partner at Clarus Law Associates, says India’s trade-pact strategy needs a more forward-looking and equitable approach as climate policy gets tangled up with trade, geopolitics and industrial policy.
The policy base
The centrepiece is the Carbon Credit Trading Scheme, India’s first explicit carbon-pricing mechanism. It sets emissions-intensity benchmarks for energy-heavy sectors: cement, aluminium, petrochemicals, refining, pulp and paper, and textiles. Firms that beat their benchmark earn tradable credits. Firms that miss it buy credits or face penalties.
The authors call the intensity approach a sound choice for an industrialising economy. The EU, by contrast, uses absolute caps that fix total emissions whatever the output. Intensity targets reward efficiency while letting production grow.
Around the scheme sit renewable consumption obligations, extended producer responsibility rules for recycling, the National Electric Mobility Mission and the National Solar Mission, investment in battery and grid-scale storage, green credit schemes, and a climate finance taxonomy meant to steer private capital.
The gap with trade partners
The trouble, the authors say, is that trade deals do not reflect any of this. The EU and UK agreements carry sustainable development chapters, but those chapters do not adequately credit India’s own efforts. Indian industry also already pays implicit carbon costs through renewable obligations, coal levies and fossil fuel taxes. Without a global standard, there is no realistic way to work out the effective carbon price paid.
Their proposals are specific. Negotiators could tie market access to climate-technology transfer, clean manufacturing investment and integration into low-carbon value chains, as the India-EFTA deal did by linking tariff cuts to investment commitments. At home, India could pilot “green PLIs” that pay industry for cutting carbon intensity, build low-carbon industrial hubs with faster approvals, and fold implicit carbon costs into the carbon-pricing mechanism.
They also say India has stayed out of the World Trade Organization’s Trade and Environment Sustainability Structured Discussions and has not been an active member of coalitions such as Brazil’s Open Coalition. Along with other Global South economies, they write, it should push for recognition of economy-wide decarbonisation efforts rather than adapt to EU border measures that favour emissions trading systems.
What is at stake for exporters
The EU’s Carbon Border Adjustment Mechanism took effect on January 1, 2026. A separate commentary in Down To Earth cited a 2024 Centre for Science and Environment study finding that CBAM-covered goods made up nearly 10 per cent of India’s exports to the EU in 2022-23, and said India estimates the levy could add an average tax burden of around 25 per cent on affected exports.
New Delhi has started consultations. The Commerce Ministry launched a series of workshops on trade and sustainable development, and the first session was held on a Friday in New Delhi, the Economic Times reported, citing CNBC TV18. The ministry is weighing domestic carbon systems, certification tools and negotiating strategy.
Sources
- India sharpens export strategy as climate rules move into trade policy
- Carbon at the border: India must turn its climate-trade argument into architecture
- India must reshape its export game for a world of climate-focused trade measures | Mint
