The last piece in this series closed with an open thread. India's Carbon Credit Trading Scheme (CCTS) had, by January 2026, brought 490 entities across eight sectors under compliance obligations — Aluminium, Cement, Chlor-Alkali and Pulp & Paper from the October 2025 rollout; Petroleum Refineries, Petrochemicals, Textiles and Secondary Aluminium from January 2026. Two more sectors sit on CCTS's designated list without notified Greenhouse Gas Emission Intensity (GEI) targets: Fertiliser and Iron & Steel. That piece flagged the gap as "worth tracking" and left it there.

This piece picks the thread up directly, because it turns out those exact two undone sectors are also squarely inside the scope of the European Union's Carbon Border Adjustment Mechanism (CBAM) — the EU's carbon tariff on imports — and they carry real, quantified export exposure. Does the fact that India's own domestic carbon market hasn't reached Fertiliser and Iron & Steel yet matter beyond India's borders? Yes: those are precisely the two sectors where India's EU-facing carbon exposure concentrates. And two trade agreements concluded or brought into force in the past year — the India-EU Free Trade Agreement and the India-EFTA Trade and Economic Partnership Agreement (TEPA) — are the government's live, if general-framework, response to that exposure.

Part 1 — What CBAM Actually Is and Why It Matters to India

The mechanics of domestic carbon pricing — CCTS, GEI targets, tradeable certificates — were covered at length in the earlier piece on India's carbon credit market, so this section stays brief. CBAM is a different instrument aimed at a different problem: it is a tariff the EU applies at import to goods whose production was not carbon-priced, designed to prevent "carbon leakage" — the scenario where EU producers who do pay an EU carbon price lose competitiveness to imports made in countries with no equivalent carbon cost. Rather than let EU industry absorb that disadvantage, CBAM charges importers a fee calibrated to the embedded carbon in the goods they bring in, minus any carbon price already paid at origin.

CBAM's initial scope covers six sectors: iron/steel, aluminium, cement, fertiliser, hydrogen, and electricity. That is the list to hold onto — it is the spine of the comparison in the next section.

Part 2 — Where CCTS and CBAM Overlap (and Where They Don't)

Laying CCTS's designated sector list next to CBAM's six-sector scope shows a real but partial overlap — not the clean, total match it might be tempting to assume.

Four sectors sit in both lists: Aluminium, Cement, Iron & Steel, Fertiliser. Six of CCTS's ten covered/designated sectors are not in CBAM's initial scope at all, and two of CBAM's six sectors (Hydrogen, Electricity) don't map onto a comparable Indian domestic compliance mechanism in the sources gathered here. Call it four of six on CBAM's side, four of ten on CCTS's — a real overlap, not a perfect one.

The two sectors where that overlap coincides with CCTS's unfinished business — Iron & Steel and Fertiliser — are also where India's quantified CBAM export exposure sits. A cross-sector trade-policy research repository's finding, independently cross-checked against NITI Aayog's Trade Watch, puts India's FY2025-26 export exposure in the two CBAM-covered iron and steel tariff chapters at: HS72 (Iron & steel) = USD 10,316.6 million; HS73 (Iron/steel articles) = USD 10,409.0 million. Combined: USD 20,725.6 million, roughly USD 20.7 billion — note this is India's total worldwide export of these chapters; the EU-bound, strictly CBAM-covered slice is smaller (~USD 8.2 billion per an ICWA estimate), so $20.7bn is the outer bound of exposure if CBAM-style carbon pricing spreads beyond the EU.

Worth separating two policy levers that look similar but aren't. India has been subsidising steel production capacity through the Specialty Steel Production-Linked Incentive scheme — a ₹6,322 crore government outlay that has drawn ₹44,106 crore in private capital investment from scheme applicants, plus a further ₹11,887 crore in committed private investment. That's a supply-side, capacity-building subsidy. CBAM is a demand-side, market-access risk: it taxes the carbon intensity of steel at the point it crosses the EU border, regardless of how much capacity India has built. As the research repo framing puts it, CBAM is "a demand-side/market-access risk distinct from the production-capacity focus of Specialty Steel PLI... decarbonizing production, not just scaling it, is the policy lever this risk calls for." PLI alone, in other words, does not address CBAM exposure — it makes more steel, not necessarily cleaner steel.

Part 3 — The Trade-Agreement Response

The India-EU FTA

On 27 January 2026, at the 16th India-EU Summit, Prime Minister Narendra Modi and European Commission President Ursula von der Leyen jointly announced the conclusion of the India-EU Free Trade Agreement, per a Ministry of Commerce & Industry release (PIB Release ID 2219065). The headline numbers: India-EU bilateral trade in goods in 2024-25 stood at ₹11.5 lakh crore (USD 136.54 billion) — exports of ₹6.4 lakh crore (USD 75.85 billion), imports of ₹5.1 lakh crore (USD 60.68 billion) — with services trade reaching USD 83.10 billion in 2024. Over 99% of Indian exports by trade value gain preferential entry into the EU under the deal, with USD 75 billion of exports "poised for take-off," including USD 33 billion in labour-intensive sectors (textiles, leather, marine products, gems and jewellery) seeing tariffs of up to 10% cut to zero on entry into force.

The CBAM-specific language in the release is the part that matters most for this piece:

"Through CBAM provisions, commitments have been secured including a forward-looking most-favoured nation assurance extending flexibilities if any granted to third countries under the regulation, enhanced technical cooperation on recognition of carbon prices, recognition of verifiers, as well as financial assistance and targeted support to reduce greenhouse gas emissions and comply with emerging carbon requirements."

The EU becomes India's 22nd FTA partner. Since 2014, India has signed trade deals with Mauritius, UAE, UK, EFTA, Oman and Australia, and announced a deal with New Zealand; in 2025 alone it signed with Oman and the UK and announced conclusion with New Zealand. The release's own framing: "The India-EU trade deal, along with India's FTA with the UK and the EFTA effectively opens up the entire European market for Indian businesses, exporters and entrepreneurs." The pact covers goods, services, trade remedies, rules of origin, customs and trade facilitation, SMEs and digital trade. Autos get calibrated quota-based liberalisation; agriculture sees dairy, cereals, poultry, soymeal and select fruits/vegetables safeguarded with no new market access, while tea, coffee, spices, fresh produce and processed foods gain it. On services, India gets predictable access to 144 EU subsectors and the EU gets access to 102 Indian subsectors, alongside a mobility framework for Intra-Corporate Transferees, Business Visitors, Contractual Service Suppliers (37 sectors) and Independent Professionals (17 sectors).

The India-EFTA TEPA

Running alongside the EU deal is the India-European Free Trade Association Trade and Economic Partnership Agreement (TEPA) — signed March 2024, in force October 2025, already live rather than newly concluded. EFTA's four member states are Iceland, Liechtenstein, Norway and Switzerland. Per a real, structured extract from an investment-promotion research repository, the agreement "carries a binding USD 100bn / 1 million jobs / 15-year investment commitment — the first of its kind in any Indian FTA — covering offshore wind, hydrogen, autonomous shipping, aquaculture and data centres."

One specific, real, and thematically apt data point from that same source: Yara — a Norwegian nitrogen fertiliser producer, one of the largest in the world — is flagged in the repository's lead-generation data as sitting under the India-EFTA TEPA's binding $100bn/15-year investment commitment. The source is explicit that this is eligibility under the treaty framework, not a confirmed pledge: it notes "no company-specific TEPA pledge found." Be precise about that distinction — this is a company positioned to potentially participate in TEPA-linked investment, not a company that has committed capital.

Still, the connection is worth naming. A Norwegian fertiliser company sitting under a treaty whose named sectors include hydrogen is a genuine link back to this blog's fertiliser coverage — green hydrogen is the primary decarbonisation pathway for ammonia-based fertiliser production, which is the same urea/soil story that opened the first piece in this series. And green hydrogen also appears on the Article 6.2 eligible-activities list covered in the carbon-market piece. That's a small, genuine three-way connection — EFTA TEPA's hydrogen focus, Article 6.2's hydrogen eligibility, and the fertiliser sector's decarbonisation need — worth flagging plainly as a connection. It is not evidence that these three things were designed together as a coordinated strategy; the sources gathered here don't establish that.

Part 4 — Synthesis: Does the Trade Response Match the Exposure?

An honest reading has to resist the tidy narrative. The India-EU FTA's CBAM language — the MFN assurance, technical cooperation on carbon-price recognition, verifier recognition, "financial assistance and targeted support" — is described in the PIB release only in general terms. Nothing in the source gathered here specifies binding CBAM-exemption terms, a quantified financial-assistance figure, or a timeline for when that "targeted support" actually arrives. This is a negotiated framework for continued engagement on CBAM. It is not, on the evidence available, proof that India's $20.7 billion exposure in iron and steel has actually been reduced or eliminated.

The EFTA TEPA side reads similarly. The $100bn investment commitment is aggregate and spans five named sectors — offshore wind, hydrogen, autonomous shipping, aquaculture, data centres. Nothing in the sources here breaks out how much of that $100bn, if any, is earmarked specifically for fertiliser-sector or steel-sector decarbonisation. The Yara linkage is real as an eligibility fact, not as a funding commitment.

Put plainly: India has real, quantified carbon-tariff exposure in exactly the two sectors its own domestic carbon market hasn't reached yet, and it has negotiated general-framework trade-agreement language addressing carbon issues broadly. What the sources here do not show is those two things connecting into a specific, sector-targeted response plan — a CBAM cost estimate for Indian steel and fertiliser exporters, a rupee figure for EU financial assistance, or a TEPA-linked investment commitment earmarked for ammonia or steel decarbonisation. The gap between exposure and response is not necessarily a failure — trade-agreement carbon language of this kind is typically negotiated as framework first, specifics later — but it is a gap, and it's worth naming as one rather than rounding it up to "resolved."

Closing

This piece closes the thread the carbon-market article left open: Fertiliser and Iron & Steel remain the two CCTS-designated sectors without notified GEI targets, and they are also the two sectors carrying India's quantified CBAM export exposure to the EU. It also extends the fertiliser thread running since the start of this series — from urea's soil cost, to bio-fertiliser and green-credit responses, to domestic carbon-market mechanics, and now to the commercial carbon-tariff exposure that same undone Fertiliser CCTS sector actually faces in EU trade.

What's still unresolved, worth tracking in a future piece: whether and when CCTS GEI targets get notified for Fertiliser and Iron & Steel; what specific CBAM compliance costs Indian exporters in those two sectors will actually face once CBAM's definitive regime takes effect; and whether any EFTA-TEPA-linked investment commitment materialises specifically in fertiliser or steel decarbonisation — the Yara case being one to watch, not yet resolved.

Sources

• Ministry of Commerce & Industry, Government of India, "India–EU Free Trade Agreement Concluded: A Strategic Breakthrough in India's Global Trade Engagement," Press Information Bureau, 27 January 2026 (Release ID 2219065).
• Cross-sector trade-policy research repository, sector_and_policy_recommendations dataset (CBAM six-sector scope, HS72/HS73 FY2025-26 export exposure figures, Specialty Steel PLI figures), cross-checked against NITI Aayog's Trade Watch.
• Investment-promotion research repository, foreign-lead enrichment dataset (India-EFTA TEPA terms, Yara eligibility flag).

This analysis is based on publicly available government press releases and independently compiled trade-policy research cited in the article above. It is provided for informational and research purposes only and does not constitute investment, legal, or policy advice.

About this article: Researched, written and edited by Umashankar Triplicane Dwarakanathan, with AI research assistance; every figure is meant to trace to the primary source cited. See the Editorial Policy for how sourcing, AI use and corrections work.