India’s carbon credit scheme gets UK recognition under its carbon tax mechanism
The United Kingdom has formally recognised India’s Carbon Credit Trading Scheme (CCTS) under its indicative list of overseas carbon pricing mechanisms that could qualify for relief under the UK’s Carbon Border Adjustment Mechanism (CBAM).India’s CCTS has been included in the UK’s published indicative list of overseas carbon pricing schemes, communicated by HM Treasury to India’s Bureau of Energy Efficiency, ANI reported, quoting Commerce Ministry officials.The scheme was found to meet the eligibility requirements under Part 3, Regulation 6 of the Carbon Border Adjustment Mechanism (Calculation of CBAM Rate and Determination of Carbon Price Relief) Regulations 2026.How will Indian exporters benefit?Under the recognition, UK importers of eligible Indian goods covered by CBAM can claim relief for the carbon price already paid on those goods under India’s CCTS. The relief will be subject to evidence and verification requirements under UK law.“This will reduce the effective CBAM liability on Indian goods, directly benefiting Indian exporters to the UK,” an official told PTI.The amount of relief will depend on the effective carbon price paid on the goods in India. The move could help prevent carbon costs from being imposed twice on the same goods — once in India and again under the UK’s CBAM.What is India’s CCTS?India notified the CCTS as a market-based mechanism to reduce, remove or avoid greenhouse gas emissions by putting a price on emissions through the trading of Carbon Credit Certificates.The scheme is being implemented by the Bureau of Energy Efficiency and funded through fees and charges collected from entities covered by it, along with the bureau’s own resources.The UK’s recognition follows technical discussions between the commerce ministry and its UK counterpart on the design and implementation of the CCTS. According to ministry sources, the decision is consistent with the UK CBAM’s principle of avoiding double taxation on goods that have already been subject to an eligible carbon price in their country of origin.The UK decided in December 2023 to introduce its CBAM from 2027. The mechanism will impose a carbon-related charge on imports of certain emissions-intensive products, including iron and steel, aluminium, fertiliser, hydrogen, ceramics, glass and cement.Indian exporters of these products could face higher costs once the mechanism takes effect. Recognition of the CCTS could help offset part of that liability where the carbon price paid in India qualifies for relief.India and the UK will continue cooperation on carbon-market design and implementation through the UK-India Energy Memorandum of Understanding and the Partnership for Market Implementation. The two countries will also maintain dialogue on carbon pricing and the interaction between India’s CCTS and UK CBAM rules.The recognition comes after India and the UK implemented their comprehensive economic and trade partnership on July 15. Merchandise trade between the two countries stood at $25.1 billion in 2025-26, while bilateral services trade was $35.4 billion in 2024.
