In the end of October 2024, the UK Government released its comprehensive response to the policy consultation on the upcoming UK Carbon Border Adjustment Mechanism (CBAM), which aims to bolster the nation’s industrial decarbonization goals and advance its commitments to net-zero emissions by 2050 and clean energy by 2030. Modeled after the European Union's CBAM, the UK framework seeks to curb carbon leakage while leveling the playing field for domestic manufacturers by applying a carbon cost to imported goods based on their embedded emissions. Indian exporters, particularly in sectors such as iron, steel, and aluminum, are expected to face challenges and opportunities as they navigate this new trade dynamic.

The UK has emerged as a vital export market for Indian goods, particularly in sectors targeted under the CBAM. While India’s exports to the EU have declined significantly in key CBAM-related industries since the introduction of the EU mechanism, the UK presents a crucial opportunity to retain and grow market presence. For instance, Indian exports to the UK in iron and steel have increased since FY 2022-23, showcasing a potential for growth despite the forthcoming compliance pressures. However, Indian manufacturers must prepare for the UK CBAM's stringent reporting requirements, which mandate accurate emissions data, including direct and indirect emissions and raw material footprints.

The transition to CBAM compliance will require Indian businesses to reevaluate their operations and supply chains. By January 2027, when the UK CBAM takes effect, exporters will need to present verified emissions data and account for carbon costs. As the EU CBAM’s phased implementation has already demonstrated, sourcing decisions are increasingly influenced by suppliers' sustainability credentials. Indian exporters must align with these evolving demands to remain competitive.

Indian businesses can turn these challenges into opportunities by proactively addressing compliance. Steps include implementing robust monitoring systems, gathering real emissions data across the value chain, and prioritizing renewable energy sourcing. This is particularly crucial as the CBAM regulations restrict reliance on default values to only 20% of reported emissions, emphasizing the importance of collaboration with suppliers to ensure transparency. Furthermore, businesses that demonstrate strong commitment to sustainable practices can leverage this compliance as a competitive advantage, bolstering their reputation among UK buyers.

CBAM Reports is here to assist Indian exporters in navigating these complexities. Our services include crafting Monitoring Methodology Documentation (MMD), developing CBAM XML templates for precise reporting, and providing tailored compliance solutions. Contact us to learn how we can support your transition to sustainable and compliant operations under the UK CBAM framework.

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