India EU climate deal 2025: With the European Union (EU) offering concessions to US manufacturers on contentious climate-related trade rules such as the carbon tax and deforestation regulation, Indian negotiators plan to push for similar relief during the upcoming round of talks in Brussels next month, a senior government official told The Indian Express.
Negotiations on the entire gamut of climate-related trade rules, particularly the Carbon Border Adjustment Mechanism (CBAM), have been among the most challenging areas in the India-EU trade deal, as New Delhi is concerned that EU climate regulations could erode the benefits Indian exporters receive under the trade agreement.
Hervé Delphin, EU Ambassador to India, had told The Indian Express at the Idea Exchange that the EU’s CBAM is not a trade measure. “It is not part of trade and the FTA [with India]. It’s about compliance with our climate agenda to accelerate decarbonisation,” Delphin told the newspaper in June this year.
However, according to the EU-US trade deal joint statement released last week, EU said: “Taking note of the US concerns related to treatment of US small and medium-sized businesses under CBAM, the European Commission, in addition to the recently agreed increase of the de minimis exception, commits to work to provide additional flexibilities in the CBAM implementation.”
The carbon tax, which will ensure that imported carbon-intensive goods into the EU bear a carbon cost starting January 2026, is seen by several developing nations as discriminatory and in conflict with international environmental law. Brazil, China, India and South Africa have raised serious concerns about CBAM in World Trade Organization (WTO) forums and Russia initiated a formal dispute on May 12 this year.
EU-US trade deal addresses climate regulations
On other climate-trade measures such as the Corporate Sustainability Due Diligence Directive (CSDDD)—which makes large companies legally responsible for identifying and addressing human rights and environmental risks throughout their operations and global supply chains—the EU softened its stance towards the US. The EU said it would “undertake efforts to ensure that” these measures “do not pose undue restrictions on transatlantic trade.”
“The European Union commits to work to address US concerns regarding the imposition of CSDDD requirements on companies of non-EU countries with relevant high-quality regulations,” the EU said in its EU-US trade deal text.
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“Recognising that production of the relevant commodities within the territory of the United States poses negligible risk to global deforestation, the European Union commits to work to address the concerns of US producers and exporters regarding the EU Deforestation Regulation, with a view to avoiding undue impact on US-EU trade,” the joint statement read.
Risk to Indian products
Official trade data shows that steel and aluminium shipments to the EU have already dropped by 24.4 per cent – from $7.71 billion to $5.82 billion in FY25 compared with the previous financial year. This is concerning as Indian products are already facing 50 per cent tariffs on steel and aluminium in the US market.
Ajay Srivastava, former trade official and founder of the Global Trade Research Initiative (GTRI), said that unlike the US—whose recent 50 per cent steel and aluminium tariffs are harsh but clearly defined—the EU’s trade barriers are complex and opaque. He added that a fair FTA with the EU should address measures such as the carbon tax.
Srivastava said that CBAM, when fully implemented, will result in a 20–35 per cent import tax on Indian firms and that the industry will have to share all plant and production details with the EU. “Large firms may need to run two production lines: expensive yet greener ones for making products for exports to EU countries, and normal ones for the rest of the world,” Srivastava said.
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The EU’s CBAM currently covers iron and steel, aluminium, cement, fertilisers, electricity and hydrogen. However, the provisions suggest that the list of items could be expanded, potentially raising the risk for Indian exporters. India’s exports to Europe reached $98 billion during the last financial year, according to official data.
Finance Minister Nirmala Sitharaman and Commerce and Industry Minister Piyush Goyal have described the CBAM as an “unfair” measure and a violation of the “common but differentiated responsibilities” (CBDR) principle of multilateral climate negotiations. This principle asserts that while all countries must act on climate change, their responsibilities are not equal due to differing levels of economic development.
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