UK recognises India's CCTS; carbon price to be accepted under CBAM regime: Comm Secy
The United Kingdom has recognised India's Carbon Credit Trading Scheme (CCTS) as a qualifying overseas carbon pricing mechanism under the UK's upcoming Carbon Border Adjustment Mechanism (CBAM).
India's CCTS now appears on the UK's indicative list of qualifying schemes, alongside the EU Emissions Trading System, China's national ETS, Japan's GX-ETS, South Korea's ETS, Singapore's carbon tax, and South Africa's carbon tax.
The recognition means Indian exporters of CBAM-covered goods to the UK can seek relief on the carbon charge payable, since a carbon price already paid in India will be offset against the UK levy.
The Commerce Secretary noted that the government is separately working on freight-cost and shipping-access issues affecting exporters, alongside the carbon-price relief.
The UK CBAM is set to take effect from January 1, 2027, covering direct emissions embedded in imported goods, with indirect emissions deferred to at least 2029.
Carbon Border Adjustment Mechanism (CBAM)
A CBAM is a border tax/levy imposed by an importing country on the embedded carbon emissions of certain imported goods, designed to prevent "carbon leakage" — where domestic industries facing a carbon price relocate production to countries with laxer climate regulation, or where cheaper high-carbon imports undercut domestically produced low-carbon goods. The importer must purchase certificates corresponding to the carbon emitted in producing the good, unless an equivalent carbon price has already been paid in the country of origin.
The UK's formal listing of India's CCTS as a qualifying scheme operationalises this offset principle for Indian exporters headed to the UK market — a carbon price already paid under CCTS will reduce or eliminate the UK CBAM charge on the same goods.
India's Carbon Credit Trading Scheme (CCTS)
The CCTS is India's domestic compliance carbon market, established as the legal successor to the Perform, Achieve and Trade (PAT) scheme. It was enabled by the Energy Conservation (Amendment) Act, 2022, which inserted provisions for a carbon credit trading scheme and carbon credit certificates into the parent Energy Conservation Act, 2001.
Because CCTS is a government-notified statutory carbon pricing scheme (not a voluntary offset market), it satisfies the UK's qualifying criteria for a "carbon price paid at origin," which is what allows Indian exporters to claim relief under the UK CBAM.
Carbon Leakage and India's Trade-Climate Diplomacy
"Carbon leakage" is the economic phenomenon underlying the rationale for any CBAM: a unilateral domestic carbon price can push emissions-intensive production offshore rather than reduce global emissions, undermining both competitiveness and climate goals. Developing countries, including India, have argued that CBAMs risk becoming a non-tariff barrier that disproportionately burdens exporters from countries with lower historical per-capita emissions.
Key Details
- India has raised CBAM concerns at the WTO and in bilateral trade talks with both the EU and UK, arguing CBAMs could conflict with the principle of "common but differentiated responsibilities" (CBDR) under the UNFCCC.
- The UK recognition is expected to be cited by India as precedent in its ongoing engagement with the EU, where a bilateral trade agreement was concluded and CBAM-related carbon-pricing recognition remains under discussion.
This episode illustrates how a domestic climate policy instrument (CCTS) has become a live trade-diplomacy lever, with India using one country's recognition to press for similar treatment elsewhere.
- CCTS legal basis: Energy Conservation (Amendment) Act, 2022 (in force from January 1, 2023); scheme notified June 28, 2023.
- CCTS regulator: Bureau of Energy Efficiency (BEE), under the Ministry of Power.
- CCTS covers ~16% of India's emissions across seven energy-intensive sectors; gases covered currently: CO₂ and PFCs.
- EU CBAM definitive (financial liability) phase began January 1, 2026; UK CBAM begins January 1, 2027.
- UK's qualifying carbon-pricing list also includes the EU ETS, China's national ETS, Japan's GX-ETS, South Korea's ETS, Singapore's carbon tax, and South Africa's carbon tax.