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India will need a credible and transparent domestic carbon-pricing framework to help carbon-intensive exporters remain competitive as global climate-linked trade rules tighten, according to a report by the Confederation of Indian Industry (CII) and IIM Ahmedabad. The report said a well-designed carbon market could simultaneously support industrial decarbonisation and help Indian companies demonstrate carbon costs under international trade regimes.
The report said the carbon-price signal is becoming increasingly important for trade-exposed sectors such as steel, cement, aluminium, fertilisers, refining and petrochemicals. This assumes greater significance with the European Union's Carbon Border Adjustment Mechanism (CBAM), which entered its definitive phase on January 1, 2026. According to the report, Indian exporters need a robust domestic registry, credible monitoring, reporting and verification systems and a transparent carbon-pricing mechanism to establish an auditable record of carbon costs. Such documentation would be important for exporters seeking recognition of eligible domestic carbon costs under CBAM. The report proposed that India consider a transparent price-collar methodology for its carbon market to provide greater certainty to companies making long-term investment decisions. It examined an illustrative reference range of $22-$60 per tonne of carbon dioxide equivalent, with $35 used as an example of a price that could potentially be discovered within the range. The report stressed, however, that these figures are illustrative policy scenarios and not recommended Indian carbon prices, forecasts or government commitments. Any eventual price collar would need to be denominated in rupees and tested against domestic abatement costs, industrial competitiveness and affordability. CII-IIMA recommended publishing a clear post-2026-27 trajectory for sectoral emissions-intensity targets and establishing transparent operating rules for any carbon-price collar. It also recommended maintaining an emissions-intensity-based system during India's rapid industrialisation phase, with a possible transition towards absolute emissions caps as sectors mature and low-carbon technologies become more widely available. The report also cautioned that carbon-market expansion, particularly into offsets, would need strong integrity safeguards to prevent an oversupply of low-cost credits from weakening compliance markets and depressing carbon prices. (ANI)
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