Page 38 - Policy Economic Report -August 2026

POLICY AND ECONOMIC
OIL & GAS MARKET

The need for such a framework is particularly significant for India's manufacturing and export sectors.
Steel, cement and aluminium are both energy-intensive and highly exposed to international competition.
If Indian producers face higher effective carbon costs when exporting to Europe than competitors with
lower emissions intensity or more established carbon-pricing systems, their price competitiveness could
weaken. A credible domestic carbon market, combined with reliable emissions data, could therefore
become an important component of India's export strategy as environmental standards become
increasingly embedded in global trade rules.

The transition also creates an opportunity for Indian industry to improve its carbon efficiency and
technological competitiveness. Greater transparency around emissions could encourage firms to invest in
cleaner production processes, energy efficiency, renewable energy and low-carbon technologies. For
sectors such as steel, where production methods vary considerably in their emissions intensity, facility-
level measurement and verification will be particularly important in determining the actual
competitiveness of individual exporters. Independent research has similarly found that lower-emission
Indian steel producers have so far been better positioned to maintain exports to the EU under the
emerging CBAM framework.

India has already begun strengthening awareness and preparedness among exporters. The Department
of Commerce, in collaboration with the National Accreditation Board for Certification Bodies and the
Engineering Export Promotion Council, organized an awareness session in August 2026 to familiarize
exporters with CBAM obligations, embedded-emissions calculations, data reporting, accreditation and
verification requirements. Such initiatives will be important in helping Indian businesses, particularly
smaller exporters, understand and comply with the new requirements.

The broader significance of CBAM extends beyond compliance with a single European regulation. Carbon-
related requirements are increasingly becoming part of international trade and investment decisions, with
other economies also considering similar mechanisms. The UK's proposed CBAM, for example, is
scheduled to take effect in 2027, indicating that carbon pricing could become a more widespread feature
of global trade. This makes the development of India's domestic carbon market increasingly relevant not
only for exports to Europe but also for maintaining competitiveness across other major markets.

August 2026 Page | 37