The U.K. has recognized India's Carbon Credit Trading Scheme (CCTS) as a qualifying criterion for pricing relief under its carbon border adjustment mechanism (CBAM), according to an official statement. This recognition is expected to reduce the tax burden on Indian exporters to the U.K., as per the official. The HM Treasury of the U.K. confirmed that the CCTS has been included in its published indicative list of overseas carbon pricing schemes assessed as qualifying criteria under the CBAM regulations. The move is significant as the Commerce Ministry had been pursuing this matter with the U.K. for a long time.

The CCTS, notified by India, aims to reduce greenhouse gas emissions by pricing them through the trading of Carbon Credit Certificates. The financial support for implementing the CCTS will be provided by the Bureau of Energy Efficiency through fees and charges collected from entities under the scheme and its own resources. The official noted that the U.K. government included the scheme in its indicative list as a qualifying carbon pricing mechanism under Britain's CBAM. With this recognition, U.K. importers of eligible Indian goods under CBAM will be able to seek carbon price relief corresponding to the effective carbon price borne by those goods under the CCTS, provided they meet the evidence and verification requirements under U.K. law.

The recognition follows sustained technical-level engagement between the two governments on the design and implementation of the CCTS. The official stated that this recognition reflects the U.K. CBAM's core principle of avoiding double taxation on goods that have already borne an eligible carbon price in their country of origin. Going forward, cooperation on carbon market design and implementation will continue through the U.K.-India Energy Memorandum of Understanding and the Partnership for Market Implementation. The two governments are also committed to continued dialogue on carbon pricing, including the interaction between the CCTS and U.K. CBAM rules, further strengthening India-U.K. engagement.

However, the amount of relief that can be claimed will depend on the effective carbon price to which the goods in question have been subject. A liable person for U.K. CBAM will still be required to satisfy the applicable evidence and verification requirements. India and the U.K. have implemented a comprehensive economic and trade partnership on July 15. Merchandise trade between the two countries stood at $25.1 billion in 2025-26, while bilateral services trade reached $35.4 billion in 2024.