India’s Carbon Credit Scheme Gets UK Nod for Exporters

India’s CCTS (Carbon Credit Trading Scheme) has been given an approval by the UK to qualify as a carbon pricing scheme under its CBAM. This may help Indian exporters in reducing the carbon costs associated with exporting carbon-intensive products to the UK market. Such recognition assumes particular significance for industries like steel and cement, wherein carbon emissions may affect the export cost. This would give a way out for avoiding imposition of carbon cost twice – in India as well as the UK market – depending upon the required verification/documentation.

What Would the UK Recognition Imply?

Under the CBAM regime of UK, the importers of goods which qualify under CBAM would possibly be able to obtain some relief in respect of the carbon cost paid in the country of origin.

In the case of Indian goods falling within the purview of CBAM, it implies that carbon costs incurred by the Indian exporters under the CCTS regime would be considered for the purpose of determining the CBAM cost payable in the UK.

But there would be no automatic relief. The UK importer would have to establish proof in accordance with UK regulations.

Why Is It Significant for Indian Exporters?

The acceptance may ensure that Indian exporters do not have to pay a carbon tax twice.

This CBAM by the UK seeks to impose a cost on carbon emissions on some imports into the country. This includes steel, aluminium, fertiliser and cement among others.

It means that Indian exporters can benefit from the acceptance of CCTS and have their liability towards CBAM lowered.

The UK will introduce CBAM starting in 2027.

How Does India’s Carbon Credit Trading Scheme Work?

India has put in place a Carbon Credit Trading Scheme which creates a market-based mechanism for lowering greenhouse gas emissions.

The scheme will allow businesses to trade carbon credits using Carbon Credit Certificates. The idea is to enable industries to avoid, reduce or offset emissions while providing an economic benefit for this activity.

The Bureau of Energy Efficiency (BEE) is in charge of running the system, the costs of which are funded by the agency’s budget and fees from participating entities.

Discussion between India-UK on Carbon Markets

The move by the UK is based on technical talks held between India and the UK on carbon markets design and execution in India.

This recognition is in line with the UK practice of granting carbon cost relief where imported goods have been exposed to an acceptable carbon price in the country of origin.

There are plans to continue talking about carbon pricing and the execution of CCTS along with CBAM policies through various channels such as UK-India Energy Memorandum of Understanding and Partnership for Market Implementation.

Effects on India-UK Trade

It is happening amid growing trade relations between India and the UK. India and the UK signed Comprehensive Economic and Trade Agreement (CETA) on July 15, 2026.

India-UK merchandise trade was worth $25.1 billion in 2025-26 and bilateral services trade stood at $35.4 billion in 2024.

Through this agreement, the UK will zero out import tariffs on many Indian product categories including processed food, marine products, engineering goods, auto parts, leather, footwear, textile, garments, chemicals, and pharmaceuticals.