EU’s Carbon Tax Hits Indian MSMEs: Exporters Face a New Green Trade Barrier
What Happened
The European Union's Carbon Border Adjustment Mechanism (CBAM), which entered its payment phase in 2026, requires importers of carbon-intensive products such as steel, aluminium, cement and fertilizers to pay a carbon-linked charge. Indian MSMEs supplying these sectors are now facing higher compliance costs, emissions reporting requirements, and pressure from European buyers to prove their products' carbon footprint.
Key Takeaways
CBAM is reshaping Indian manufacturing by turning carbon emissions into a trade cost. While it may push MSMEs toward cleaner production and better sustainability practices, many small exporters risk losing competitiveness due to the cost of compliance, certification, and decarbonization investments. India is exploring support measures to help MSMEs adapt and retain access to EU markets.