The EU Carbon Border Adjustment Mechanism moved out of its transitional phase on 1 January 2026. For Indian manufacturers exporting to the EU, this is no longer a future concern, CBAM obligations are live, and the first annual report (covering calendar year 2026) will be due in May 2027. Here is what you need to know.
What CBAM is
CBAM is the EU's mechanism for putting a carbon price on imports of goods from countries that do not have equivalent carbon pricing. EU importers of covered goods must purchase CBAM certificates equivalent to the embedded emissions in the goods they import. The certificate price tracks the EU ETS (European Union Emissions Trading System) carbon price.
The obligation sits with the EU importer, not the Indian exporter. But the EU importer can only discharge their CBAM obligation if they have accurate embedded-emission data from the manufacturer. That data must come from you, the Indian exporter.
Covered goods (as of 2026)
| Sector | CN Codes | What's covered |
|---|---|---|
| Iron & steel | CN 72, 73 | Pig iron, DRI, flat-rolled products, tubes, pipes |
| Cement | CN 2523 | Portland cement, clinker, aluminous cement |
| Aluminium | CN 76 | Unwrought aluminium, profiles, foil, wire |
| Fertilizers | CN 28, 31 | Ammonia, nitric acid, urea, mixed fertilizers |
| Hydrogen | CN 2804 10 | Electrolytic and reforming hydrogen |
| Electricity | CN 2716 | Electricity imports into the EU |
What Indian exporters need to provide
EU importers will ask their Indian suppliers for the "embedded emissions" per tonne of product. This means the Scope 1 and Scope 2 GHG emissions associated with producing one tonne of the exported good, calculated using the CBAM methodology (which broadly follows the GHG Protocol corporate accounting standards).
The CBAM methodology and BRSR GHG are closely aligned
Steps for Indian exporters this year
- Check if your products fall under the covered CN codes, the CBAM Regulation Annex I is the reference.
- Identify which of your EU customers will be affected (importers with annual imports above the de minimis threshold).
- Calculate or commission a calculation of embedded emissions per tonne of each CBAM-covered product you export.
- Prepare a data package: production data, fuel and electricity consumption, emission factors (with versions cited), allocation methodology.
- Register to provide embedded emission data to your EU customer via the CBAM Transitional Registry or a certified third-party verifier.
What happens if you do not comply
If an Indian exporter cannot provide embedded emission data, the EU importer must use CBAM default values set by the EU Commission, which are based on the average EU production carbon intensity and are deliberately conservative (punishing) to incentivise real data. EU importers working with suppliers who cannot provide data will face either higher CBAM costs or will shift to suppliers who can. The commercial pressure from EU buyers will drive compliance more than any regulatory penalty.
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