In early September 2026, UK’s HM Treasury wrote to the Bureau of Energy Efficiency to confirm that the carbon market in India, specifically India’s Carbon Credit Trading Scheme (CCTS) had been added to the UK’s published list of qualifying overseas carbon pricing schemes under its Carbon Border Adjustment Mechanism (CBAM).
This meant: Lower carbon tax. No double pricing. A win for Indian exporters.
All of that is directionally true.
In this blog we explain what the recognition actually delivers, how the relief is calculated, what documentation is required, who it is for, and how it aligns with broader EU CBAM requirements.
What the UK CBAM is
From 1 January 2027, UK importers of five categories of carbon-intensive goods (aluminium, cement, fertiliser, hydrogen, and iron and steel) will pay a charge based on the carbon footprint and emissions embodied in those goods.
The obligation sits on the UK importer, not the overseas producer. Registration is triggered at £50,000 of covered goods over a rolling twelve months, or expected within the next thirty days. The first accounting period runs the full calendar year 2027, with payment due by 31 May 2028; quarterly returns follow from 2028 onward.
The purpose is to make imported goods carry a carbon cost comparable to what UK producers pay under the UK EU ETS equivalent, ensuring that domestic carbon emission reduction does not simply push production offshore.
For India, the exposure is real but concentrated.
Independent estimates put roughly USD 775 million of Indian exports to the UK within CBAM India scope. Iron and steel alone accounted for about USD 893 million of India’s roughly USD 13.4 billion of merchandise exports to the UK in FY 2025-26.
What does “Recognize” actually mean for India
The UK’s rules include a mechanism called Carbon Price Relief. Where the emissions embodied in an imported good have already been subject to a qualifying carbon price overseas under carbon trading in India, the UK importer can deduct that amount from the CBAM charge.
For this to be available, the overseas scheme has to meet criteria set out in the Carbon Border Adjustment Mechanism (Calculation of CBAM Rate and Determination of Carbon Price Relief) Regulations 2026. HMRC published a list of schemes assessed as meeting those criteria on 27 August 2026, based on information as at 19 June 2026.
India’s CCTS appears on that list alongside fifteen others, including the EU ETS, China’s national ETS, the Korea ETS, Japan’s GX-ETS, Singapore’s carbon tax, and South Africa’s carbon tax.
However:
- No Exemption: No Indian goods are exempt from UK CBAM. Recognition creates eligibility to claim a deduction; it does not remove the charge.
- Importer Liability: The relief is claimed by the UK importer, not by the Indian exporter. The commercial benefit reaches the Indian producer only through negotiation, pricing, and continued buyer preference.
- Variable Relief: The amount is not fixed. It is calculated per installation, per year, from verified data.
How the relief is calculated
HMRC’s method works at the level of the installation (the specific plant that made the good) and over a calendar year. The steps are:
- Take the installation’s total emissions in tonnes of $\text{CO}_2\text{e}$ for the relevant calendar year.
- Split those emissions into the elements of the carbon pricing scheme they were subject to: a headline carbon price, free allowances, graduated prices, greenhouse gas removals, or thresholds.
- Multiply the emissions in each priced element by that element’s price per tonne.
- Add those figures together and divide by the installation’s total emissions.
- The result is the effective carbon price per tonne.
- Multiply that by the embodied emissions (carbon footprint) in the goods being imported, convert to sterling at the HMRC-published quarterly rate, and that is the relief.
There are other rules, for example:
- Emissions covered by free allowances or by a zero-rated threshold are treated as having no price. They are still counted in the denominator.
- Any compensation, rebate, or refund the installation receives is divided by total emissions and subtracted from the effective carbon price.
The Need for Evidence
Even where relief is available, it is only claimable if the paperwork exists.
The UK importer must hold a completed carbon pricing verification form obtained from the installation that made or processed the goods, or from someone in the supply chain. Without it, there will be no relief.
And the form must be completed by a verifier that, at the time of verification, is:
- Accredited by an accreditation body that is a full member of Global Accreditation Cooperation Incorporated and a signatory to its multilateral recognition arrangement;
- Accredited against ISO/IEC 17029:2019, ISO 14064-3:2019, ISO 14065:2020 and ISO 14066:2023; and
- Independent of the installation, the importer, and the jurisdiction operating the carbon pricing scheme.
Global Accreditation Cooperation Incorporated became operational on 1 January 2026, absorbing the functions of IAF and ILAC.
The form must also cover the installation’s total emissions for a calendar year, and specifically one of the two calendar years before the year of import. Goods imported in 2028 need a verified form for 2026 or 2027.
This is because CCTS runs on the Indian fiscal year, while HMRC works on calendar years.
Is it only for the Big Companies?
It is tempting to read all of this as a large-company problem. However, you miss two crucial points:
- Precursor Goods: UK CBAM relief explicitly extends to CBAM goods used in the manufacture or processing of other CBAM goods. If you supply billets, sections, clinker, or intermediate aluminium into an exporting producer, your emissions and your carbon price are part of their embodied emissions calculation. Your data dictates their tax liability, making verifiable emissions reporting an immediate customer requirement.
- The Default Value Trap: Where verified supplier data is unavailable, UK importers can fall back on government-published default emissions values. Defaults are deliberately conservative. For any supplier whose actual emissions intensity is better than the default, using the default produces a higher charge.
Therefore: The exporter who can produce verified, installation-level, calendar-year emissions data will be cheaper to buy from than the one who cannot. The recognition adds a second, smaller layer of advantage on top of robust carbon management practices.
What to do in the next two quarters
For any Indian manufacturer exporting aluminium, cement, fertiliser, hydrogen, or iron and steel to the UK (or supplying someone who does):
- Confirm Scope by Commodity Code: UK CBAM is defined by tariff code, not by sector name. Check your actual export lines rather than assuming.
- Establish Installation-Level Emissions Accounting: Move to calendar-year tracking. Gate-to-gate, Scope 1 and Scope 2, per plant, not per company.
- Separate Emissions: Split your emissions into priced and unpriced portions. Under carbon trading in India, this means knowing your GEI target, your actual intensity, and your surplus or shortfall for each compliance year to determine the effective carbon price.
- Identify Accredited Verifiers: Partner with a validation and verification body accredited to the four ISO standards through a Global ACI full member that satisfies independence conditions.
- Engage Buyers Early: Talk to your UK buyers now. They are the ones carrying the liability and making the relief claim.
What to watch next
- HMRC’s published CBAM rates and default emissions values, expected before the regime begins on 1 January 2027.
- The first CCC trading sessions on the power exchanges and the price band that emerges within the carbon market in India.
- Final gazette notification of iron and steel GEI targets following the June 2026 revised draft.
- Whether the EU follows. The EU CBAM entered its definitive phase on 1 January 2026 and contains its own provision for deducting carbon prices paid in the country of origin. EU recognition of the CCTS would matter considerably more in volume terms than UK recognition does.
TL;DR
The UK has recognised that India now prices industrial carbon. That is a genuine diplomatic and regulatory achievement, and it removes a structural disadvantage that Indian exporters would otherwise have carried into 2027.
What it does not do is reduce anyone’s bill automatically. The relief is calculated per installation, from verified calendar-year data, using an effective carbon price that an intensity-based scheme will tend to hold low. It is claimed by a UK importer who cannot claim it without a form your plant has to produce, signed by a verifier your plant has to appoint.
How Build to Sustain helps
Build To Sustain works with Indian manufacturers on exactly this problem: establishing installation-level emissions accounting that stands up to third-party verification, mapping compliance positions under CCTS, driving carbon emission reduction, and preparing the evidence base that export customers are beginning to ask for.
We offer specialized ESG consulting services as an advisory, measurement, and reporting firm. We help you make sure that when the verifier arrives, and when the buyer asks, the data is there and it holds.
If you export into CBAM-covered sectors (or for sectors that will eventually come in focus for EU CBAM or UK CBAM) and are not yet accounting for your carbon footprint at plant level on a calendar-year basis, leverage our expert ESG consulting services today to achieve seamless CBAM compliance and streamline your carbon management.
