EU India Free Trade Deal Needs Carbon and Steel Safeguards, Says…

Sarah J · 2026-01-26T17:13:32.000Z

India’s ongoing Free Trade Agreement (FTA) negotiations with the European Union (EU) could have significant implications for its engineering exports if key safeguards are not included, industry leaders warn. Sectors such as machinery, metal products and industrial equipment - which form a large share of India’s outbound shipments may face up to 10% lower export volume if the pact proceeds without provisions for Carbon Border Adjustment Mechanism (CBAM) support and steel quota relief. The CBAM, introduced by the EU to ensure imported products reflect the same carbon pricing that European producers face under stringent climate rules, is designed to prevent carbon leakage as the bloc enforces its Green Deal targets. However, Indian exporters argue that immediate application of CBAM compliance costs without transitional support or technical cooperation could make Indian goods less competitive in Europe, especially in carbon-intensive segments like steel and heavy engineering. India’s engineering sector which includes machinery, auto components, capital goods and metal-based industrial products has steadily expanded global market share, thanks to competitive cost structures and growing production capacity. However, stringent carbon-compliance requirements and the absence of quota relief on steel imports could disrupt market access, increase compliance overheads and undermine export growth, according to industry associations. Trade experts suggest that integrating tailored safeguards within the EU-India FTA such as phased implementation timelines, joint carbon reporting frameworks, and negotiated steel quotas could help balance the EU’s climate interests with Indian industry competitiveness. Such measures may enable exporters to adapt product standards and emissions reporting without abrupt cost burdens. Indian industry bodies believe that harmonising environmental and trade objectives is essential to securing a mutually beneficial agreement. They emphasise that technical cooperation, capacity building and alignment with global carbon reporting standards can ease compliance and foster long-term partnerships across green industrial value chains. Negotiators on both sides are reportedly considering flexible approaches that could ease the transition for Indian exporters while supporting the EU’s climate ambitions. These include shared carbon verification protocols, joint technical committees for CBAM implementation, and programme-based relief mechanisms for sectors undergoing emissions intensity improvements. As discussions progress, industry groups and policymakers stress the importance of an FTA that not only lowers tariffs and broadens market access but also accounts for emerging regulatory frameworks like CBAM ensuring India’s engineering exports remain globally competitive while aligning with climate policy evolution.

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EU India Free Trade Deal Needs Carbon and Steel Safeguards, Says… | SEINET