From 1 January 2026, EU importers of Indian goods in CBAM‑covered sectors will have to buy CBAM certificates based on the verified embedded emissions of each shipment, so poor or missing data on the Indian side will translate directly into higher landed cost and competitiveness risk.
What actually starts in 2026
-
The “definitive regime” of CBAM begins on 1 January 2026, moving from pure reporting to a real carbon cost on imports.
-
EU importers will have to submit an annual CBAM declaration and surrender CBAM certificates matching the embedded emissions in their imports, at a price linked to the EU ETS carbon price.
-
This applies first to specific sectors: iron and steel, cement, aluminium, fertilisers, electricity, and hydrogen, plus certain downstream products made from these materials.
How the carbon cost is calculated
-
For each shipment, the EU declarant must report the embedded CO₂ (direct and, in some cases, indirect emissions) at installation level, not just at company or product-average level.
-
They then buy CBAM certificates at a price derived from the average weekly EU ETS allowance price; one certificate represents one tonne of CO₂.
-
Any explicit carbon price already paid in the country of production (for example, a domestic carbon tax or ETS) can be deducted, but only if it is properly documented and verifiable.
Role of verified vs default emissions data
-
From 2026, importers must use verified emissions data provided by non‑EU producers wherever possible; this data must be checked by an accredited independent verifier.
-
When such data is not available, the EU allows use of default values for embedded emissions, but these are designed to be conservative and are generally set above typical real emissions to push the market toward real data.
-
Analysis of CBAM design and industry guidance highlights that relying on defaults tends to increase CBAM costs, sometimes significantly, compared with companies that can demonstrate lower, verified emissions.
What data Indian manufacturers need to provide
For Indian exporters, the practical implication is: “no data = higher carbon cost at the EU border.”
Key activity‑based data points typically required include:
-
Fuel use by type and quantity at each relevant installation (e.g., furnace, kiln, boiler).
-
Electricity consumption (MWh) and, where possible, information on grid mix or renewable sourcing.
-
Process emissions from chemical reactions (e.g., in cement, certain metal and fertiliser processes).
-
Material inputs and emissions factors for key raw materials and intermediates.
-
Transport distances and modes for upstream inputs and, in some cases, internal logistics where material.
Generic ESG or CSR reporting is not sufficient; data must be installation‑level, aligned with EU’s monitoring and reporting regulation (MRR), and traceable over time.
Why starting in 2025–26 is still workable
-
The EU has already run a transitional reporting phase, so templates, guidance and digital registries are largely stabilised; companies starting now can build directly against these final expectations rather than guessing.
-
CBAM will be phased in alongside the phase‑out of free allowances in EU ETS up to 2034, meaning carbon costs will rise progressively over several years, giving Indian exporters time to improve both data quality and decarbonisation performance
Strategic implications for Indian exporters
-
Exporters that can offer reliable, verified, low‑carbon data become more attractive to EU buyers who want to minimise CBAM costs and administrative risk.
-
There is now a commercial incentive to invest in energy efficiency, fuel switching, renewable PPAs, and process optimisation, because every tonne of CO₂ avoided reduces the number of CBAM certificates the importer must buy.
-
Early movers can use CBAM‑ready data as a sales differentiator in tenders, especially in steel, aluminium, and engineering goods where EU customers are already screening suppliers on embedded carbon.
If you export to the EU now is the time to act. Aligning your plants with CBAM’s data and verification requirements over the next few months can prevent default values, reduce carbon‑related costs for your EU buyers, and turn low‑carbon performance into a pricing and sales advantage.
If you need support or want to know more you can reach us directly on WhatsApp: wa.me/919811126365
Or email: [email protected] for more details!
Let’s ensure 2026 is compliant, predictable, and well-prepared.
