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CBAM · Trade PolicyIndia’s WTO Challenge to CBAM: The Legal Arguments, India’s Four-Track Strategy, and Why Exporters Cannot Wait for a Ruling
India formally objected to carbon border adjustment mechanisms 29 times at the WTO between 2020 and 2024 — second only to China and Russia in the frequency of its objections — and has positioned CBAM as a violation of GATT non-discrimination principles, the climate equity principle of Common but Differentiated Responsibilities, and the procedural rules of the WTO’s dispute settlement system. Yet as of April 2026, India has not filed a formal WTO dispute against the EU. Russia became the first country to formally challenge CBAM in the WTO dispute settlement system, filing DS639 in May 2025; the EU declined to enter consultations and the matter is moving toward panel proceedings. For India, the Russia dispute provides legal cover and interpretive precedent without the diplomatic cost of being the complainant in a case against its largest trading partner. But the strategic ambiguity of India’s WTO posture cannot protect Indian steel and aluminium exporters from the immediate financial consequences that the definitive CBAM phase, live from 1 January 2026, has already imposed. This article maps the legal architecture of India’s case against CBAM, the critical default value problem that makes early compliance so financially consequential, and what India’s four-track strategy actually involves.
Between 2020 and 2024, India raised concerns against CBAM 29 times at the WTO — second only to China and Russia. India’s core legal arguments are: (1) CBAM violates GATT Article I:1 (Most-Favoured Nation) because exemptions for Iceland, Norway, Liechtenstein and Switzerland constitute preferential treatment not extended to India; (2) CBAM violates GATT Article III:4 (National Treatment) by differentiating like products based on non-product-related production process methods; (3) CBAM fails the GATT Article XX chapeau test because it constitutes arbitrary or unjustifiable discrimination between countries where the same conditions do not prevail — India’s historical responsibility for climate change is fundamentally different from the EU’s; (4) CBAM violates the CBDR-RC principle under the UNFCCC and Paris Agreement by imposing EU-equivalent carbon pricing obligations on developing economies without recognising differentiated responsibilities.
Russia filed the first formal WTO legal challenge to CBAM — DS639 — on 12 May 2025, requesting consultations under WTO Dispute Settlement Understanding Article 4. The EU declined consultations on 22 May 2025. Russia’s complaint alleges violations of GATT 1994 Articles I:1, II:1(a), II:1(b), III:1, III:2, III:4, X:3(a) and XI:1; the Agreement on Import Licensing Procedures; the Agreement on Subsidies and Countervailing Measures; and the Protocols of Accession of Bulgaria, Croatia, Estonia, Latvia and Lithuania. Russia additionally argues that the EU ETS free allocation to domestic industries constitutes a prohibited export subsidy under the SCM Agreement. India is not a party to DS639 but can join as a third party if panel proceedings are established — allowing India to put its legal arguments on record without bearing the cost of being the complainant.
The most immediately consequential feature of CBAM for Indian exporters who do not provide facility-specific verified emissions data is the default value plus punitive markup regime. The EU’s implementing acts of 17 December 2025 set India’s default steel emission intensity at 4.32 tCO₂ per tonne. Punitive markups apply: 10% in 2026, 20% in 2027, and 30% from 2028. At 4.32 tCO₂/t with a 30% markup from 2028, the effective emission intensity for certificate calculation becomes 5.616 tCO₂/t. At projected EU ETS prices of €83 to €92 per tCO₂e, this results in certificate costs of €466 to €517 per tonne — compared with approximately €79 to €88 per tonne for producers providing verified data reflecting India’s national average of 2.5 tCO₂/t. The difference — approximately €380 to €430 per tonne — is not a regulatory technicality; it is a commercially decisive competitive disadvantage that Indian exporters must eliminate through verified data submission.
India’s response to CBAM operates across four tracks simultaneously: multilateral engagement at the WTO and UNFCCC; bilateral diplomacy through the India-EU FTA negotiations and the EU-India Strategic Agenda (September 2025); domestic decarbonisation through CCTS, the green steel taxonomy, and RE procurement under GEOA; and the CCTS equivalence claim — arguing that carbon prices effectively paid under India’s CCTS should be deductible from CBAM certificate obligations under CBAM’s Article 9. Whether the CCTS intensity-based CCC payments qualify as “effectively paid carbon prices” under CBAM’s deduction mechanism is unresolved and contested, but the EU-India Strategic Agenda has created a formal diplomatic channel through which this question is being negotiated.
Even if a WTO panel were established today, a final ruling would take approximately three to five years to reach, given the Appellate Body’s current incapacitation (the US has blocked new appointments since 2019, leaving only a Multi-Party Interim Appeal Arbitration Arrangement as an alternative). India’s exporters face a financially operative CBAM from January 2026. The WTO route provides political cover, potential long-term design reform pressure, and a forum for maintaining the CBDR-RC equity argument — but it cannot protect Indian competitiveness in the near term. The UK is independently implementing its own CBAM from 1 January 2027. The practical answer for Indian exporters is facility-level MRV compliance and emission reduction investment — not litigation.
The WTO legal architecture — India’s case and the EU’s defence
India’s legal arguments against CBAM at the WTO operate across three distinct provisions of the General Agreement on Tariffs and Trade 1994. The EU’s defence rests principally on GATT Article XX’s general exceptions for environmental measures. Understanding both positions is essential for any analysis of whether India’s WTO strategy can succeed — and on what timeline.
The most legally contested question is the Article XX chapeau analysis. The Appellate Body’s Shrimp-Turtle ruling (US-Shrimp, DS58, 1998) established that measures conditioning market access on whether a foreign country adopted “a programme comparable in effectiveness” to the US’s sea turtle protection standards could qualify under Article XX — but only if the implementation was flexible and not coercive. The EU argues CBAM meets this standard: it does not require India to adopt the EU ETS, only to demonstrate that embedded emissions carry a carbon price equivalent to what EU producers pay. India responds with the Shrimp-Turtle chapeau’s explicit prohibition on conditioning market access on the adoption of “essentially the same regulatory programme” — arguing that CBAM’s effective requirement for EU-standard product-level MRV infrastructure amounts to exactly this.
The proportionality of CBAM’s environmental effectiveness is also part of India’s chapeau argument. OECD estimates that under a “Fit for 55” aligned policy landscape, CBAM would reduce global emissions by only 0.54%. Asian Development Bank research puts the figure at 1.3% at a carbon price of €100. India argues that such minimal global emissions reduction cannot justify measures that transfer revenue from developing to developed country treasuries, undermine multilaterally negotiated Paris Agreement commitments, and impose disproportionate administrative burdens on exporters without EU-standard emissions infrastructure.
Russia’s DS639 — the first formal WTO challenge and what it means for India
On 12 May 2025, Russia submitted a formal request for consultations with the EU under WTO Dispute Settlement Understanding Article 4 — designated DS639 on the WTO’s official dispute register. This was the first ever formal WTO legal challenge to CBAM. The EU declined Russia’s request on 22 May 2025, stating that consultations could not be fruitful and could not lead to a mutually satisfactory solution. The EU clarified that this was without prejudice to its rights in any future adjudicative proceedings. Russia may now request the establishment of a formal panel.
Russia’s complaint alleges that the CBAM Package — defined to include Regulation (EU) 2023/956 establishing CBAM, its delegated and implementing acts, and Directive 2003/87/EC establishing the EU ETS — is inconsistent with GATT 1994 Articles I:1, II:1(a), II:1(b), III:1, III:2, III:4, X:3(a) and XI:1; the Agreement on Import Licensing Procedures; the Subsidies and Countervailing Measures Agreement; and the Protocols of Accession of Bulgaria, Croatia, Estonia, Latvia and Lithuania. Russia’s most distinctive additional claim — that EU ETS free allocations to domestic producers constitute a prohibited export subsidy — is analytically significant. If a WTO panel accepts this argument, it would mean the EU ETS-CBAM combination illegally subsidises EU steel and aluminium exports while taxing imports. This would undermine the EU’s central defence that CBAM simply equalises carbon costs between domestic and imported goods.
India is not a complainant or respondent in DS639. If Russia requests the establishment of a panel and the panel is established, India can join as a third party to the proceedings. Third party status gives India the right to make submissions, receive panel documents, attend hearings, and present its own legal arguments — without being bound by any ruling or bearing the reputational cost of filing a complaint against the EU. This is precisely the strategic position India has navigated toward: keeping the legal challenge alive through Russia’s complaint while maintaining its bilateral relationship with the EU through FTA negotiations and the Strategic Agenda. CEEW analysis notes that India’s severe diplomatic criticism of CBAM means the EU “may in the future be convinced to adapt the CBAM framework voluntarily, to preserve its economic relations” with India — a diplomatic pressure route that would be compromised by India becoming a formal complainant in panel proceedings before the FTA is concluded. The WTO Appellate Body’s current incapacitation — the US has blocked new appointments since 2019 — also means any panel ruling faces an uncertain appeal path, further reducing the near-term value of a formal complaint.
The default value trap — why compliance is not optional
The most pressing practical problem for Indian exporters is not the WTO legal debate. It is the default value regime that the EU’s implementing acts of 17 December 2025 established for the CBAM definitive phase.
Under CBAM, importers who can provide facility-specific verified emissions data are assessed on their actual embedded emissions. Those who cannot — or choose not to — are assigned country-specific default emission intensity values, currently set at 4.32 tCO₂ per tonne for Indian steel. These defaults are not neutral estimates; the implementing acts layer punitive markups on top of them specifically to incentivise compliance with verification requirements: 10% in 2026, 20% in 2027, and 30% from 2028. The financial consequences of defaulting are severe:
| Scenario | Emission intensity used | Certificate cost at €87/tCO₂e (mid-range) | Competitive position |
|---|---|---|---|
| Default value — from 2028 | 4.32 × 1.30 = 5.616 tCO₂/t (India default + 30% markup) | €489/tonne | Commercially unviable for most EU-bound export volumes; would require 15–22% price cuts to absorb (GTRI) |
| Default value — 2026 | 4.32 × 1.10 = 4.752 tCO₂/t (10% markup) | €414/tonne | Severe cost burden; significant competitive disadvantage vs EU domestic and EAF producers |
| Verified actual India average | ~2.5 tCO₂/t (national average; no markup) | ~€83–88/tonne (after benchmark deduction) | Manageable but still significant; incentivises further emission reduction |
| Best-practice BF-BOF (verified) | ~1.8 tCO₂/t (plant-specific; top-quartile Indian mill) | ~€57–63/tonne | Competitive against global benchmark; partial CBAM advantage vs average Indian peers |
| EAF with renewable electricity | ~0.3 tCO₂/t | ~€19–22/tonne | Near-equivalent to EU domestic EAF producers; minimal CBAM liability |
The default value approach was designed precisely to create this cost differential — making the cost of non-compliance with MRV requirements so severe that exporters have no economically rational choice but to invest in facility-level emissions verification. For Indian exporters who have not invested in product-level MRV infrastructure during the CBAM transitional phase (October 2023 to December 2025), 2026 is the year when theoretical exposure becomes an actual cash cost.
CEEW’s analysis (December 2025), drawing on Majumder et al. 2024, projects that CBAM will cause Indian export losses of USD 771 million, corresponding to a 0.72% decline in India’s output to the EU. CSEP analysis identifies the sectoral concentration: iron and steel account for 28.26% of India’s CBAM-exposed EU exports; aluminium accounts for 27.18%; cement for 6.67%. GTRI estimates that exporters may need to cut prices by 15 to 22% to absorb the CBAM tax burden without losing EU market share. By 2034, when full CBAM application is in force and EU ETS free allocations have been fully phased out, Indian steel exports to the EU could face charges of USD 210 to USD 243 per tonne. These estimates carry significant uncertainty — actual CBAM costs depend on the EU ETS price trajectory, the pace of India’s industrial decarbonisation, the outcome of CCTS equivalence negotiations, and whether individual exporters invest in facility-level MRV. But the directional finding is unambiguous: the cost of inaction compounds over time.
India’s four-track strategy
India continues to use every multilateral forum to register its objections. The 29 formal WTO Committee on Trade and Environment objections between 2020 and 2024 establish a documented legal record. At COP30 (November 2025) in Belém, India alongside China and Saudi Arabia continued to criticise CBAM as protectionist and introducing unfair trade barriers. Brazil proposed regular UN reviews of CBAM — a position India supported. This track maintains the CBDR-RC argument in the climate governance architecture, prevents CBAM from being normalised as accepted international climate law, and builds the coalition of developing economies that gives India diplomatic weight in bilateral EU negotiations. It does not reduce the immediate financial burden on exporters.
The India-EU Free Trade Agreement negotiations are the most commercially important channel. India is seeking: a CBAM carve-out or phased implementation schedule specific to India; MSME exemptions beyond the EU’s de minimis threshold; technology transfer provisions to support emissions infrastructure development; and CBAM revenue recycling toward India’s green transition. The EU-India Strategic Agenda, adopted in September 2025, created a formal commitment for the EU to deduct carbon prices effectively paid in India from CBAM financial adjustments — a significant concession that, if operationalised, could provide substantial relief to CCTS-covered exporters. The Omnibus Regulation (EU 2025/2083, in force October 2025) further allows third countries to propose an annual default carbon price based on domestic carbon pricing mechanisms — a pathway through which India could propose CCTS-based default prices that are lower and more accurate than the EU’s current country defaults. Squire Patton Boggs analysis notes that India’s severe criticism of CBAM may convince the EU to adapt the CBAM framework voluntarily to preserve the FTA relationship.
India’s most substantive response to CBAM is not legal argumentation but industrial transformation. The CCTS compliance mechanism, live for FY2025-26, is the first instrument that creates a domestic carbon price for India’s nine hard-to-abate sectors. The green steel taxonomy (gazette-notified December 2024) creates a premium-product classification for low-emission steel. The Green Energy Open Access rules allow industrial consumers to procure renewable electricity that reduces CCTS Scope 2 GEI and CBAM embedded Scope 2 emissions simultaneously. The vehicle scrappage policy and Steel Scrap Recycling Policy 2019 are building the scrap supply chain for EAF expansion. Each of these instruments reduces the absolute CBAM liability of Indian exporters by reducing their embedded emissions. An Indian steel plant that moves from 2.5 tCO₂/t to 1.8 tCO₂/t through energy efficiency and renewable electricity cuts its CBAM certificate cost by approximately 28% without any change in trade law. This is the only track that provides immediate, certain relief.
CBAM’s Article 9 (Regulation (EU) 2023/956) allows for deduction of carbon prices “effectively paid” in the country of origin from CBAM certificate obligations. The EU-India Strategic Agenda of September 2025 commits the EU to implementing this deduction for India. But whether India’s CCTS intensity-based CCC payments qualify as “effectively paid carbon prices” remains contested and technically unresolved. Fundamental incompatibilities include: CCTS operates as an intensity-based baseline-and-credit system; the EU ETS imposes absolute caps with auctioned allowances. CCCs are earned by over-performance against an intensity target — they are not a payment per tonne of CO₂ emitted but a reward per tonne of CO₂ below target. The CBAM deduction mechanism was designed with absolute-cap ETSs in mind. Whether the complex equivalency determination required to map CCTS payments onto CBAM deductions can be completed before the 2026 filing deadlines is uncertain. India’s government should be pushing for a clear technical protocol for this equivalency determination as the highest-priority near-term deliverable from the FTA negotiations.
While Indian exporters focus on the EU CBAM, the United Kingdom is independently implementing its own carbon border adjustment mechanism from 1 January 2027. The UK CBAM is included in the Finance Bill 2025-26, following HMRC’s consultation on draft primary legislation published 27 November 2025. The UK CBAM broadly follows the EU approach — covering steel, aluminium, cement, fertilisers, and other sectors — with some variations. Indirect emissions associated with CBAM goods will not be included until 2029 at the earliest. The registration threshold has been increased above the EU’s levels. India does not have an FTA with the UK yet, although negotiations are ongoing. The UK CBAM creates a second, independent compliance requirement for any Indian exporter that ships to both the EU and UK markets. The same MRV infrastructure and emissions verification data that satisfies EU CBAM requirements should substantially satisfy UK CBAM compliance — creating a fixed-cost investment in plant-level emissions accounting that pays off across both markets simultaneously.
What exporters should do — the practical answer to an unresolved legal question
The WTO legal challenge to CBAM will take years to reach a definitive ruling, assuming the Appellate Body’s current incapacitation is resolved. Even if India filed a formal complaint tomorrow, and even if a panel ruled in India’s favour, the ruling would not arrive before 2029 at the earliest. CBAM is financially operative from January 2026. India’s exporters are paying certificate costs — or, if they have not registered as authorised CBAM declarants, their EU importers are bearing the cost on their behalf, almost certainly reducing the prices they are willing to pay for Indian goods.
The practical answer has three components. First, invest in product-level emissions verification infrastructure immediately. The difference between the default value certificate cost (€414 to €489 per tonne) and the verified-data certificate cost (€57 to €88 per tonne for a well-operated plant) is so large that the investment in facility-level MRV infrastructure pays back in one to two years on any meaningful export volume to the EU. This is not a climate commitment — it is a commercial calculation. Second, use CCTS MRV as dual-purpose infrastructure. The MRV requirements that CCTS imposes on obligated entities — quarterly data submission, ACVA verification, GHG reporting — generate the same type of product-level emissions data that CBAM verification requires. The investment is the same; the returns are across both CCTS compliance and CBAM compliance simultaneously. Third, reduce actual embedded emissions. This is the only route to structurally reducing CBAM liability rather than managing it through administrative compliance. Renewable electricity procurement under GEOA, EAF expansion, and energy efficiency investment all reduce CBAM costs in proportion to actual emission reductions — every tonne of CO₂ eliminated from production eliminates one CBAM certificate requirement permanently.
India’s WTO challenge to CBAM is legitimate, well-grounded in international law, and diplomatically essential. It is also, for the daily operational decisions of Indian steel and aluminium exporters, irrelevant in the near term. The two tracks — legal challenge and commercial compliance — are not alternatives. They must be pursued simultaneously.
Frequently Asked Questions
Has India formally challenged CBAM at the WTO?
As of April 2026, India has not filed a formal WTO dispute settlement case against CBAM. India has formally objected to CBAM 29 times between 2020 and 2024 in the WTO Committee on Trade and Environment — second in frequency only to China and Russia. Russia filed the first formal WTO dispute, DS639, on 12 May 2025. India is monitoring this case and could join as a third party if a panel is established, allowing it to place its legal arguments on record without being the complainant. India’s preferred approach has been to pursue the CBAM challenge through the India-EU FTA negotiations and through the EU-India Strategic Agenda, seeking deductions for CCTS-based carbon prices and phased implementation provisions, rather than through adversarial WTO litigation against its largest trading partner.
Can India’s CCTS be used to reduce CBAM certificate costs?
Potentially, but not yet with certainty. CBAM’s Article 9 allows deduction of carbon prices “effectively paid” in the country of origin. The EU-India Strategic Agenda (September 2025) commits the EU to implementing this deduction for India. The Omnibus Regulation (EU 2025/2083) allows third countries to propose annual default carbon prices based on domestic carbon pricing mechanisms. However, whether India’s intensity-based CCTS qualifies as an “effectively paid carbon price” under CBAM’s deduction mechanism is contested. CCTS generates Carbon Credit Certificates when a plant over-performs against its intensity target — it is not a direct payment per tonne of CO₂ emitted. The CBAM deduction mechanism was designed with absolute-cap ETSs in mind. A detailed technical equivalency protocol needs to be negotiated between India and the EU before CCTS CCCs can be definitively credited against CBAM obligations. Until this is resolved, Indian exporters should invest in facility-level MRV and actual emission reduction rather than waiting for CCTS equivalence to provide relief.
What are the WTO legal grounds on which CBAM is most vulnerable?
Legal scholars identify two primary WTO vulnerabilities. First, the MFN argument: Iceland, Norway, Liechtenstein and Switzerland are exempt from CBAM because their carbon pricing is linked to the EU ETS. If a WTO panel finds this exemption constitutes preferential treatment not available to countries with equivalent but differently structured carbon pricing, the measure fails GATT Article I:1. India’s CCTS is not linked to the EU ETS but is arguably equivalent in its decarbonisation ambition. Second, the Article XX chapeau test: even if CBAM qualifies as an environmental measure under Article XX(g), the chapeau prohibits arbitrary or unjustifiable discrimination. Russia’s SCM claim — that EU ETS free allowances to domestic producers constitute an export subsidy — is the most novel legal argument and, if accepted, would undermine the EU’s core defence that CBAM merely equalises carbon costs between domestic and imported goods. Legal outcomes are uncertain, with WTO jurisprudence on climate measures still developing.