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Climate & Environment

Are India’s FTAs Becoming Climate Policy by Default? The CBAM Challenge

The climate impact of FTAs is reshaping India’s trade strategy as EU carbon rules like CBAM alter market access and industrial competitiveness.

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The climate impact of FTAs is becoming a defining issue for India’s trade negotiations, as carbon-linked rules like the EU’s CBAM increasingly shape market access and industrial competitiveness.
Image credit: Markus Spiske/Pexels

The climate impact of FTAs is becoming a defining issue for India’s trade negotiations, as carbon-linked rules like the EU’s CBAM increasingly shape market access and industrial competitiveness.

As India accelerates negotiations on free trade agreements (FTAs) with the European Union, United Kingdom, EFTA countries and the United States, a parallel transformation is unfolding — one where trade policy is increasingly shaped by climate-linked conditions.

A recent policy discussion summarised in India’s FTAs: Trade, Climate and Strategic Choices, organised by Climate Trends, argues that the EU’s Carbon Border Adjustment Mechanism (CBAM) represents not a marginal environmental tool, but a structural shift in global trade governance. The deeper question is whether India’s trade engagements are effectively becoming instruments of climate policy — and if so, under whose terms.

CBAM: From Environmental Tool to Structural Trade Instrument

Ajay Srivastava, Founder and CEO of GTRI, cautioned against viewing CBAM as a narrow carbon levy limited to a handful of sectors. While the current scope covers steel, aluminium, cement, fertilisers, hydrogen and electricity, the EU has stated its intention to expand the mechanism to all industrial products by 2033.

“What most people ignore about CBAM is that it will not only hurt six products,” Srivastava said. “After a few years when CBAM is in full form, then the normal CBAM liability on exports will range anywhere between 20% to 35%, and even 50% or more for products like aluminium.”

India’s average applied tariffs into the EU are currently around 3–3.5%. CBAM, by contrast, could impose carbon-linked charges many times higher. “Instead of 3% custom duties… exporters may pay 20%-40% under CBAM. And in return, all EU goods will be entering India at zero tariffs. Such a deal appears asymmetric,” he added.

From this perspective, CBAM is less a climate safeguard and more a structural replacement of tariffs with carbon-linked entry costs — one that sits outside the formal FTA framework while reshaping its economic value.

Climate Compliance as Market Entry Condition

The broader concern is cumulative compliance. CBAM does not operate in isolation. The EU Deforestation Regulation, supply-chain traceability rules, and ESG-linked disclosure expectations together create what analysts describe as an embedded climate cost for market access.

Colette van der Ven, Founder and Director of Tulip Consulting, noted that CBAM was a key sticking point in EU–India negotiations. “Even if the Indian government’s press statements suggest that there are provisions around MFN treatment, that may, in practice, not have very much value… giving country-specific flexibilities was already off the cards for the EU.”

In effect, climate-linked measures are emerging as non-negotiable features of trade architecture.

Divergent Impact: Large Firms vs MSMEs

The climate-trade shift is not uniform in its impact.

Large integrated producers such as Tata Steel and JSW, according to van der Ven, are relatively insulated. Many operate European subsidiaries, have internal monitoring, reporting and verification (MRV) systems, and possess capital for cleaner technologies. For them, CBAM is a manageable compliance cost.

However, the situation is starkly different for MSMEs.

Ajay Srivastava pointed to early evidence from CBAM’s reporting phase, which began in October 2023. “In FY25, our exports of steel and aluminium to the EU were down by 24%. Why? Because MSMEs could not supply data, and EU-based importers stopped placing orders from them. So, MSMEs will be the hardest hit. It will soon be a game only for large players.”

Van der Ven added that default carbon values under CBAM are punitive. “Even if you have relatively clean production, but you cannot measure it, you are still going to be getting a default value that is a lot higher than the actual carbon emissions… That means that your competitiveness level goes down.”

The key barrier is not necessarily emissions intensity, but data asymmetry and compliance infrastructure.

Trade Policy as Domestic Climate Policy

Suranjali Tandon, Associate Professor at NIPFP, framed the issue more fundamentally: “All matters of trade policy are also matters of domestic economic policy.”

She argued that Indian firms will require domestic carbon pricing, measurement systems, and industrial support mechanisms to respond effectively. “Indian companies need to have their own carbon pricing to be able to respond to such measures… The best thing that can be done is to have measurement systems in place while ensuring that there are domestic policies that support increasing production capacity.”

Without robust domestic support — incentives, certification regimes, transitional demand buffers — exporters may struggle to absorb external carbon costs.

Fragmented Global Carbon Regimes

A central tension lies in fragmentation. EU-bound exports account for roughly 20% of India’s trade. The remaining 80% flows to markets without CBAM-style requirements.

Srivastava highlighted the dilemma: Indian firms may need separate production processes for EU markets, raising costs across their operations. Producing “green” goods for a minority of export destinations could erode competitiveness elsewhere.

This fragmentation complicates investment decisions. Without globally harmonised carbon pricing, unilateral measures risk distorting trade patterns rather than aligning them.

Strategic Choices Ahead

The discussion suggests that FTAs are no longer purely about tariffs and quotas. They increasingly interact with carbon pricing systems, sustainability standards, and domestic regulatory reforms.

Recommendations emerging from the dialogue include:

>> Prioritising measurement and MRV infrastructure, especially for MSMEs

>> Designing selective emissions trading systems, beginning with large emitters

>> Aligning industrial, trade, and climate policies domestically

>> Viewing FTAs as platforms for cooperation, rather than solutions in themselves

Archana Chaudhary of Climate Trends summarised the broader shift: “Trade seems to be forcing domestic climate action and capital is being steered in that direction. These new trade deals and the carbon-linked rules are going to be shaping up India’s real economy.”

Climate Alignment or Competitiveness Risk?

The deeper climate perspective is complex. On one hand, CBAM aligns with long-term decarbonisation goals. On the other, its current design places disproportionate adjustment burdens on developing economies and smaller firms.

Van der Ven suggested that alignment exists beneath the friction. “Beyond the differences, there is alignment between the EU and India in wanting to decarbonize. We must think towards these win-win opportunities along the supply chain.”

The outcome, however, will depend less on individual FTAs and more on whether India can integrate trade, industrial, and climate strategies coherently at home.

As climate-linked trade measures proliferate, India’s FTAs may increasingly serve not just as economic agreements — but as de facto climate policy instruments reshaping the country’s industrial future.

EP Staff is the editorial team at EdPublica, an independent media organisation focused on science, education, environment and public policy. The team produces evidence-based news, features, explainers and analysis on issues that shape society and everyday life.

Climate & Environment

Why Delhi’s Geography Makes It Vulnerable to Severe Air Pollution

Delhi’s geographical location, surrounding agricultural and industrial regions, and winter weather conditions contribute to its recurring air pollution crisis.

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Industrial chimneys releasing smoke into the atmosphere, illustrating the regional industrial emissions contributing to Delhi's air pollution.
Industrial emissions from Delhi and surrounding regions add to the pollution burden across the Indo-Gangetic Plain. Representational image. Image credit: Юлия Кондратова/ Pexels

Delhi’s air pollution is a recurring problem shaped by more than the emissions produced within the city. Its location in the Indo-Gangetic Plain, proximity to agricultural and industrial regions, and seasonal weather conditions contribute to the accumulation of pollutants, particularly during winter.

The national capital lies in a relatively flat region surrounded by densely populated cities, agricultural land and industrial clusters. Emissions from vehicles, factories, construction activities and crop-residue burning add to the pollution load across this wider region. Atmospheric conditions often determine how quickly these pollutants disperse.

Location in the Indo-Gangetic Plain

Delhi is situated in the northwestern part of the Indo-Gangetic Plain, which extends across several northern and eastern Indian states. The region’s relatively flat terrain allows air masses to move across state boundaries, carrying dust, smoke and other pollutants over long distances.

Industrial emissions, vehicle exhaust, construction dust and agricultural burning across Delhi and neighbouring states contribute to this regional pollution burden. As a result, the city’s air quality is influenced by emissions generated beyond its administrative boundaries.

A delivery worker transporting goods on a cycle rickshaw along a hazy Delhi road, illustrating road transport and urban activity amid poor air quality.
Road transport and urban emissions contribute to Delhi’s air pollution, while stagnant winter conditions allow pollutants to accumulate. Representational image. Image credit: Soumalya Halder/ Pexels

Delhi’s Air Pollution: Winter Weather Traps Pollutants

Temperature inversion is a major reason for the deterioration of Delhi’s air quality during winter. Under normal conditions, warm air near the surface rises and helps disperse pollutants. During an inversion, a layer of warmer air sits above cooler air near the ground, restricting vertical movement.

The atmospheric boundary layer, the lowest part of the atmosphere where surface emissions mix with surrounding air, also becomes shallower during winter. This reduces the volume of air available to dilute pollutants. Combined with low wind speeds, these conditions allow particulate matter to accumulate close to the ground.

The geographical influence on Delhi’s air quality is also documented in studies examining regional wind patterns and pollution transport. A 2015 study published in the Journal of the Air & Waste Management Association, titled An Investigation of Potential Regional and Local Source Regions Affecting Fine Particulate Matter Concentrations in Delhi, India, used backward air-mass trajectories to trace the movement of pollutants reaching the city.

It identified Pakistan, Punjab, Haryana and Uttar Pradesh as significant potential source regions. The study also found that wind direction influenced particulate concentrations in Delhi, with air arriving from industrial and urban centres in the surrounding National Capital Region carrying additional emissions. These findings show how pollution can move across state boundaries and affect the capital’s air quality.

Crop-residue Burning Adds to Pollution

Punjab, Haryana and western Uttar Pradesh have extensive paddy-growing regions. After harvesting, some farmers burn crop residue to clear their fields for the next cultivation cycle. Smoke from these fires contains fine particulate matter that can travel towards Delhi, depending on wind direction and speed. The practice coincides with the onset of winter, when weaker winds and atmospheric stability already favour pollution accumulation.

Crop-residue burning is a seasonal contributor, however. Vehicle emissions, industrial activities, construction dust and waste burning continue to affect air quality throughout the year. Delhi’s proximity to Rajasthan also exposes it to dust transported from arid and semi-arid regions, including the Thar Desert. During summer, strong winds can carry desert dust towards the capital, increasing concentrations of particulate matter, particularly PM10. Construction sites, unpaved roads and exposed soil within the National Capital Region add to the dust burden.

Why the Monsoon Brings Relief

Monsoon rainfall helps remove airborne particles through a process called wet deposition, in which raindrops capture pollutants and bring them to the ground. Stronger winds and atmospheric mixing during this season also improve pollutant dispersion.

After the monsoon withdraws, rainfall decreases and atmospheric conditions gradually become more favourable for pollution accumulation. The combination of reduced rainfall, declining wind speeds and winter temperature inversions contributes to the seasonal deterioration in air quality.

Pollution Needs a Regional Response

Delhi’s geographical position makes air pollution a regional problem. Controlling emissions within the capital remains important, but pollution transported from surrounding agricultural, industrial and urban areas also needs attention.

Stronger winds can temporarily improve air quality by dispersing pollutants. Sustained improvement, however, requires reductions in emissions across the wider airshed, alongside measures to address local sources and seasonal pollution.

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Climate & Environment

Extreme weather affects India on 92% of days in 2026, raises concerns over climate preparedness

Extreme weather affected India on 92% of days between January and September 2026. A CSE–Down To Earth report documents thousands of deaths and extensive damage to crops, houses and livestock.

Jishnu P

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Palm trees bending in strong winds during heavy rain, with waterlogged ground in a coastal area.
Strong winds and heavy rainfall can damage infrastructure, disrupt livelihoods and increase flood risks in vulnerable coastal regions.Image credit: Pixabay

India experienced extreme weather events on 92 per cent of days between January and September 2026, resulting in thousands of deaths and extensive damage to agricultural land, houses and livestock, according to a new assessment by the Centre for Science and Environment (CSE) and Down To Earth released on Nov 4. The findings highlight the growing frequency of weather-related disasters and the mounting pressure on communities, livelihoods and public infrastructure.

The report, Climate India 2026: An Assessment of Extreme Weather Events, released on November 4, recorded extreme weather on 251 of the 273 days during the first nine months of the year. These events included heatwaves, cold waves, lightning, thunderstorms, heavy rainfall, floods and landslides.

The assessment estimated that extreme weather claimed 3,220 lives, affected 4.25 million hectares of cropped area, destroyed 128,334 houses and killed 47,244 animals during the period. The scale of the damage points to the increasing exposure of communities and economic activities to climate-related hazards.

The report’s five-year analysis also indicates that extreme weather has become a persistent feature of India’s climate risk. The proportion of days affected by such events increased from 86–88 per cent in 2022 and 2023 to 93 per cent in 2024 and 99 per cent in 2025. Across the five-year assessment period, extreme weather events claimed an estimated 16,200 lives and affected at least 20.6 million hectares of cropped land.

Regional differences and changing weather patterns

The effects were unevenly distributed across the country. Uttar Pradesh and Himachal Pradesh recorded extreme weather on nearly 64 per cent of the 273 days assessed in 2026, the highest frequency among states. Uttar Pradesh reported the highest death toll, with 811 fatalities, followed by Maharashtra with 286 and Bihar with 245.

Maharashtra recorded the largest area of affected crops at 2.83 million hectares. Uttar Pradesh followed with 0.69 million hectares and Bihar with 0.23 million hectares. At the regional level, northwest India recorded extreme weather on 235 days, followed by east and northeast India with 218 days.

The assessment also identified unusual temperature and rainfall patterns during the year. February 2026 was India’s driest February since 1901 and the fourth warmest in 125 years. July recorded the country’s third-highest mean temperature for the month, while the minimum temperature was the second highest on record.

The monsoon season presented another contrast. Despite an overall rainfall deficit, heavy rainfall, floods or landslides occurred somewhere in the country on all 122 days of the monsoon season, according to the assessment. This illustrates how a seasonal rainfall deficit can coexist with destructive episodes of intense rainfall in particular locations. The distribution and intensity of rainfall can therefore be as consequential as the seasonal total.

Agriculture and livelihoods under pressure

Agriculture remains particularly vulnerable to these changes. The CSE–Down To Earth assessment found that the area of cropped land affected by extreme weather increased from 1.84 million hectares in 2022 to 9.47 million hectares in 2025. In 2026, a further 4.25 million hectares were affected during the first nine months.

Crop damage can have consequences beyond a single harvest. For small and marginal farmers, repeated losses can reduce household income, increase borrowing and undermine their ability to invest in the next agricultural season. Flooding can destroy standing crops, damage irrigation systems and erode fertile soil, while prolonged dry spells and heat stress can reduce yields and increase irrigation requirements.

The impact also extends to livestock and rural infrastructure. The loss of animals affects household assets and agricultural productivity, while damaged houses and roads can disrupt access to markets, schools and healthcare. Communities already facing economic insecurity may find it difficult to recover before another extreme weather event occurs.

Government data also underline the scale of the challenge. A Ministry of Home Affairs response published by the Press Information Bureau in August 2026 provides state-reported figures on human deaths, cattle losses, damaged houses and affected cropped areas due to hydro-meteorological disasters during 2023–24, 2024–25 and 2025–26. Disaster management and relief are primarily the responsibility of state governments, which makes local preparedness and response capacity particularly important.

Rising temperatures and disaster risks

The India Meteorological Department’s assessment of 2025 provides further context for the country’s changing climate conditions. Its Statement on the Climate of India during 2025 recorded the annual mean land-surface air temperature at 0.28°C above the 1991–2020 average, making 2025 the eighth warmest year since records began in 1901. The report also documented deaths associated with lightning, thunderstorms, floods, heavy rainfall and landslides.

Rising temperatures can intensify heat-related health risks and contribute to conditions favourable for more intense rainfall. However, individual extreme weather events cannot automatically be attributed to climate change. Their occurrence and severity are influenced by several factors, including natural climate variability, local geography, land-use changes and infrastructure.

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Representative image of temeperature rise.Image credit:Pixabay

The death estimates in the IMD and CSE–Down To Earth assessments differ because the reports use different datasets and methods of tracking extreme weather. They should therefore be treated as separate assessments rather than combined into a single national total.

Strengthening preparedness

The findings raise questions about India’s preparedness for increasingly frequent weather-related hazards. Early-warning systems, resilient infrastructure, effective urban drainage, heat action plans and better protection for agricultural communities are important components of disaster-risk reduction.

Forecasts must also reach vulnerable communities in time and in accessible languages. In flood-prone areas, improved drainage, protection of wetlands and floodplains, and restrictions on construction in high-risk zones can reduce exposure. In agriculture, crop diversification, climate-resilient varieties, better water management and accessible crop insurance can help farmers manage weather-related losses.

The CSE assessment also points to gaps in the availability of consolidated information. Government agencies use different definitions and data-collection methods for extreme weather events, making it difficult to build a comprehensive picture of their frequency and impact. Consistent reporting and transparent disaster-loss databases would help policymakers identify vulnerable regions and evaluate the effectiveness of adaptation measures.

As extreme weather affects more regions and sectors, coordination between meteorological agencies, disaster-management authorities, local governments and agricultural departments will become increasingly important. The challenge is no longer limited to responding after disasters occur. It also involves reducing exposure, protecting livelihoods and strengthening the capacity of communities and infrastructure to withstand future climate risks.

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Energy

India’s renewable energy boom faces a growing challenge as power grids struggle to absorb clean electricity

India’s renewable energy expansion is facing a growing challenge as grid constraints and limited power storage lead to clean electricity curtailment. New research highlights the need for stronger transmission infrastructure, battery storage and greater flexibility in coal-fired power generation.

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Solar panels and wind turbines generating renewable electricity in a mountainous landscape.
A hybrid renewable energy installation combining solar photovoltaic panels and wind turbines. Image for representation.Image credit:Pexels

India’s rapid expansion of solar and wind energy is creating a new challenge for its electricity sector: ensuring that the power generated from renewable sources can be absorbed and supplied when needed. A growing volume of clean electricity is being curtailed because of grid constraints and the operational limitations of coal-fired power plants, raising questions about whether the country’s electricity infrastructure can keep pace with its energy transition.

An analysis published by energy think tank Ember on June 17, 2026, estimates that India curtailed approximately 2.1 terawatt-hours (TWh) of renewable electricity during the financial year 2025–26 because coal-fired power plants had to maintain their minimum technical operating levels. This represents around 1.3% of total renewable electricity generation and an estimated ₹629 crore worth of foregone electricity.

The report, titled Bottleneck to the Next Phase of Renewable Energy Growth in India, identifies the limited operational flexibility of coal-based power plants as a significant obstacle to integrating additional renewable electricity into the grid. It estimates that around 10 gigawatt-hours (GWh) of battery storage capacity is immediately needed to prevent this form of renewable energy curtailment.

The findings highlight a growing mismatch between India’s expanding renewable energy capacity and the flexibility of its existing electricity infrastructure.

Coal dependence and grid constraints complicate the energy transition

Solar power generation is concentrated during daylight hours, particularly around midday, while electricity demand often remains high after sunset. Coal-fired power plants, which continue to provide a substantial share of India’s electricity, cannot always reduce their output sufficiently during periods of high solar generation without affecting their stable operation.

Coal plants have minimum technical load requirements, below which they cannot operate safely and reliably. When these plants reach their operating limits, grid operators may have to reduce renewable electricity generation to maintain the balance between electricity supply and demand.

Ember’s analysis found that coal plants were operating at or below their minimum technical load in more than half of midday dispatch intervals in April 2026. During the same month, renewable energy curtailment accounted for 37% of down-regulation, compared with almost zero a year earlier.

More recent findings from the Centre for Research on Energy and Clean Air (CREA) indicate that the problem extends beyond coal-related operational constraints.

Its Quarterly Energy Snapshot for India: Q2 2026–27, published on October 12, estimates that approximately 1,835 million units of renewable electricity were curtailed during July and August 2026 because of grid and operational constraints. Of this, 1,462 million units came from solar generation and 373 million units from wind.

The report also records India’s peak electricity demand reaching 270 GW on July 16, 2026, an 18% increase from the corresponding quarter of the previous financial year. Coal and lignite continued to account for approximately 66% of electricity generation during the quarter, supplying 351 billion units.

These figures illustrate the difficulty of balancing increasing renewable generation with a power system that continues to depend heavily on conventional sources.

Energy storage emerges as a critical solution

Energy storage systems could help address this mismatch by storing surplus solar and wind electricity when generation is high and releasing it when demand increases or renewable output declines.

Battery energy storage systems (BESS) can respond quickly to fluctuations in electricity supply and demand. Pumped-storage hydropower offers another option, using surplus electricity to pump water to an elevated reservoir and generating power when it is released through turbines.

A 2026 report by the Rocky Mountain Institute (RMI), titled Catalysing Energy Storage in India: From Procurement to Reliable Power, estimates that India will require at least 60 GW of grid energy storage capacity by 2030. This includes 42 GW, equivalent to 208 GWh, of battery energy storage systems.

According to CREA, approximately 9.1 GWh of battery storage capacity was operational in India as of its Q2 2026–27 assessment. Although tenders for nearly 290 GWh of storage capacity had been issued by August 2026, the gap between planned and operational infrastructure remains substantial.

The International Energy Agency’s (IEA) India Renewable Energy Market Report 2026, released on November 3, also identifies faster investment in electricity grids and energy storage as essential to sustaining renewable energy expansion.

The report notes that India’s renewable power capacity has surpassed 300 GW in 2026, almost quadrupling over the past decade. It projects that capacity could reach approximately 530 GW by 2030, with solar photovoltaic technology accounting for more than 80% of new additions.

The IEA also warns that faster transmission development, improved forecasting, energy storage and greater flexibility in electricity generation will be necessary to integrate increasing volumes of variable renewable power.

India’s renewable energy expansion has already delivered significant energy security benefits. According to the IEA, renewable electricity helped the country avoid more than $100 billion in cumulative coal and natural gas import expenditure between 2011 and 2025.

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A vast field of wind turbines.Image credit:Pexels

However, the growing incidence of renewable electricity curtailment highlights the need to strengthen the infrastructure supporting this transition. Expanding generation capacity alone will not ensure that clean electricity reaches consumers when it is needed.

As India moves towards its 2030 renewable energy targets, investments in storage, transmission networks and more flexible power generation will be critical to reducing electricity losses and making its transition away from fossil fuels more effective.

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