EU CBAM explained for Indian exporters: what it is and how to prepare
A plain guide to the EU Carbon Border Adjustment Mechanism as of October 2026: covered goods, the 2026 definitive period, the 50-tonne threshold, default and actual values, CBAM certificates, proposed changes, and a checklist for Indian MSME exporters.
What is CBAM and why did the EU create it?
The EU already puts a carbon price on its own factories through the EU Emissions Trading System (EU ETS). Factories outside the EU do not pay that price, so EU makers could lose business to imports, or move production abroad. This is called carbon leakage.
CBAM is designed to mirror the EU ETS at the border. It puts a price on the emissions embedded in selected imported goods, at a level equal to what EU producers pay under the ETS. It was set up by Regulation (EU) 2023/956 of 10 May 2023.
At the same time, the free ETS allowances that EU producers in these sectors receive are being reduced. According to the Commission's Q&A, until free allowances in CBAM sectors are fully phased out in 2034, CBAM applies only to the share of emissions that does not get free allowances in the EU, so importers and EU producers are treated alike.
Sources: European Commission, Carbon Border Adjustment Mechanism (CBAM) Questions and Answers, last updated 15 October 2026; European Commission, Carbon Border Adjustment Mechanism (main page); European Commission, CBAM definitive regime; European Commission, CBAM legislation and guidance; European Commission news: Officially published: Simplifications for CBAM (20 October 2025); European Commission news: CBAM successfully entered into force on 1 January 2026 (14 January 2026); European Commission, CBAM communication and news; European Commission, Price of CBAM certificates; European Parliament press release: CBAM: Parliament adopts simplifications (10 September 2025); Regulation (EU) 2023/956 establishing a carbon border adjustment mechanism (EUR-Lex); Regulation (EU) 2025/2083 amending Regulation (EU) 2023/956 (EUR-Lex); European Parliamentary Research Service: Extension of CBAM scope to downstream goods and anti-circumvention measures (7 September 2026); Ministry of Commerce and Industry, India's Free Trade Agreements (2025-26): Key Highlights
This article was prepared with AI assistance and checked by the GreenEye team against the sources shown in each section.
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