UK recognises India's carbon credit scheme for CBAM relief
UK officially recognises India's Carbon Credit Trading Scheme under its CBAM, allowing Indian exporters to claim carbon price relief.
In a significant development for bilateral trade, the United Kingdom has formally recognised India's Carbon Credit Trading Scheme (CCTS) as a qualifying carbon pricing mechanism under its Carbon Border Adjustment Mechanism (CBAM). The recognition, confirmed by the UK's HM Treasury in a communication to the Bureau of Energy Efficiency under the Ministry of Power, will allow Indian exporters to seek relief from the UK's carbon tax on eligible goods.
The decision follows sustained technical discussions between the two governments on the design and implementation of the CCTS. With this inclusion in the UK's indicative list of overseas carbon pricing schemes, importers of Indian goods covered under CBAM can now claim carbon price relief corresponding to the effective carbon price already borne by those goods under the CCTS. This is subject to meeting the evidence and verification requirements prescribed under UK law.
The move is expected to lower the effective CBAM liability on Indian products, directly benefiting domestic exporters to the UK. It also aligns with the core principle of the UK's CBAM, which seeks to avoid double taxation on goods that have already incurred an eligible carbon price in their country of origin.
The CCTS was notified by India with the objective of reducing, removing, or avoiding greenhouse gas emissions by pricing them through the trading of Carbon Credit Certificates. The Bureau of Energy Efficiency will fund the scheme's implementation through fees and charges collected from participating entities and its own resources.
Going forward, cooperation on carbon market design will continue through the UK-India Energy Memorandum of Understanding and the Partnership for Market Implementation. Both governments have also committed to ongoing dialogue on carbon pricing, including the interaction between the CCTS and UK CBAM rules.
The recognition comes amid growing economic ties between the two nations. A comprehensive economic and trade partnership was implemented on July 15. Merchandise trade between India and the UK stood at $25.1 billion in 2025-26, while bilateral services trade reached $35.4 billion in 2024.