India, EU strike climate–commerce balance with CBAM roadmap, $500 million green support and mobility boost

THEBUSINESSBYTES BUREAU

NEW DELHI, JANUARY 28, 2026

India and the European Union have broadly agreed on a comprehensive set of measures to address the European bloc’s stringent carbon regulations on carbon-intensive imports, marking a significant breakthrough in bilateral economic and climate cooperation. The understanding includes financial support for decarbonisation, technical assistance, and the creation of a joint working mechanism to iron out operational challenges arising from the EU’s Carbon Border Adjustment Mechanism (CBAM), official sources said on Wednesday.

From January 1, the EU began implementing CBAM, the world’s first carbon tariff framework, which imposes levies on carbon-intensive products such as steel, cement and aluminium. The regulation had emerged as one of the most contentious issues during the India-EU free trade agreement negotiations, which were successfully concluded earlier this week.

As part of the broad consensus, the two sides are working towards signing a memorandum of understanding under which the EU will partner with India to help domestic industries reduce their carbon footprint. The EU has committed nearly USD 500 million for the first two years to provide technical assistance, advanced technology and funding to support India’s transition towards cleaner production.

While the EU has maintained that it cannot offer country-specific concessions under CBAM, citing the uniform applicability of the regulation to both foreign partners and European domestic industry, it has agreed to greater transparency and cooperation. A dedicated technical working group will be set up to ensure complete visibility on how carbon footprints are measured and how tariffs are calculated, helping resolve outstanding concerns.

In a key assurance for Indian industry, the EU has agreed to accredit Indian verifiers to audit firms’ carbon footprints, addressing cost and access issues that would arise if verification were limited to Europe. It has also accepted India’s proposal that any flexibility extended by the bloc to another country under CBAM would automatically apply to India. Additionally, India’s domestic policies that incentivise emission reductions and the levies collected under them will be accounted for under CBAM to prevent double taxation on Indian exporters.

Officials described the engagement on CBAM as a “living dialogue”, allowing both sides to address any future measures that may arise as the regulation evolves.

Beyond trade and climate issues, the agreement delivers a major boost to mobility for Indian students and professionals. Sources termed the mobility partnership as one of the EU’s best-ever commitments, covering intra-corporate transferees, contractual service suppliers, independent professionals and trainees. Intra-corporate transfers will be allowed across all services sectors with an initial stay of three years, extendable by two more years, and will also cover spouses and dependents.

Provisions for contractual service suppliers will apply to 37 sectors, while independent professionals will be covered in 17 sectors, including high-interest areas for India such as IT, business and professional services. Student mobility will be allowed without restrictions, with post-study work opportunities, a move expected to accelerate the growing flow of Indian students to Europe by providing greater certainty and predictability.

Both India and the EU have reiterated their political commitment to sign and ratify the free trade agreement at the earliest, despite the legal scrubbing and ratification process taking time. Recent engagements with key stakeholders indicate strong intent on the EU side to complete the process on an accelerated timeline.

Once implemented, the India-EU free trade agreement, covering nearly a quarter of global GDP, will eliminate tariffs on 99 per cent of Indian exports to the EU and reduce duties on over 97 per cent of EU exports to India. The EU estimates annual tariff savings of up to four billion euros for its exporters. Indian sectors such as textiles, apparel, leather goods, handicrafts, footwear and marine products are expected to gain significantly, while Europe stands to benefit in wine, automobiles, chemicals and pharmaceuticals, with wine duties set to fall sharply from the current 150 per cent to a range of 20–30 per cent under the pact.