UK adds India’s carbon credit programme to its border tax list

London has formally recognised India’s domestic carbon‑credit framework as part of its Carbon Border Adjustment Mechanism (CBAM), a move that will allow UK importers of eligible Indian goods to claim relief from the carbon price levied at the border. The Hindu reported that the decision follows a technical assessment confirming that India’s scheme meets the criteria set out in the UK’s carbon‑tax regulations.

Under the CBAM, imports of certain high‑emission products – such as steel, cement and aluminium – are subject to a charge reflecting the carbon intensity of their production. By accepting India’s credit system, the UK will treat verified Indian emissions reductions the same way it treats credits from EU‑registered programmes, effectively reducing the cost for companies that source these materials from India.

The CBAM, originally introduced by the European Union and now mirrored by the UK, is designed to prevent “carbon leakage,” where manufacturers shift production to jurisdictions with laxer climate rules. India launched its own carbon‑credit scheme in 2022 to incentivise lower‑emission practices and generate tradable credits for domestic projects. Recognition by a major market like the UK signals growing international confidence in the robustness of India’s verification processes.

For Indian exporters, the development could improve competitiveness in the UK market, where carbon‑related costs have risen sharply since the CBAM’s rollout. Analysts note that firms able to demonstrate compliance with the recognised scheme may see price advantages, potentially expanding trade volumes in sectors such as renewable‑energy equipment and low‑carbon steel. Conversely, UK firms importing from India will need to adjust procurement strategies to capture the available relief.

The UK government has indicated that it will continue to evaluate other countries’ carbon‑credit mechanisms for possible inclusion. Ongoing dialogue between the two nations aims to harmonise reporting standards and ensure that credits are not double‑counted. If successful, the arrangement could become a template for broader acceptance of emerging market climate programmes, reinforcing global efforts to align trade with climate objectives.