The CBAM-CCTS Article 9 Deduction: What Indian Exporters Must Document to Reduce Their CBAM Certificate Obligations
Article 9 of the CBAM Regulation allows the carbon price paid in the country of origin to reduce net CBAM certificate obligations. For Indian CCTS obligated exporters, this is a real but modest financial provision in Phase 1. The documentation chain — production volume, verified GHG data, CCTS registry entry, and CBAM declaration linkage — is complex and untested in the first declaration cycle. This is the complete guide to how the deduction works and what to document.
Key Takeaways
- Article 9 of the CBAM Regulation (EU 2023/956) provides that the quantity of CBAM certificates that an authorised declarant must surrender may be reduced by the carbon price effectively paid in the country of origin on the embedded emissions of the imported goods. The deduction is calculated as the carbon price paid (in €/tCO₂e equivalent) multiplied by the quantity of GHG emissions for which that price was paid — subject to the condition that the carbon price was paid under a mandatory market mechanism in the third country, not through a voluntary offset. For India, the CCTS is the qualifying mandatory mechanism. The HPO-related carbon cost (green hydrogen premium as implied carbon price) does not qualify — only formally priced CCTS compliance costs through CCC purchase qualify.
- The Article 9 deduction is calculated at the level of the specific product exported — not at the company level. If an Indian steel plant exports HRC to the EU and is also a CCTS obligated entity that has purchased CCCs to cover its compliance shortfall (or generated a surplus), the deduction is calculated by determining what carbon price was effectively paid per tonne of CO₂e for the specific production volume that corresponds to the EU-exported HRC. This requires an allocation methodology — how to assign the CCTS compliance cost of the total plant output to the specific quantity exported to the EU. The EU’s CBAM Implementing Regulation provides guidance on this allocation, but the methodology is complex and involves proportional assignment based on either production volume ratios or embedded emission ratios.
- At current CCTS CCC prices of Rs 400 to 900 per tCO₂e (€4 to €9/tCO₂e) versus EU ETS prices of €84/tCO₂e, the Article 9 deduction covers approximately 5 to 11 percent of the gross CBAM certificate obligation for an Indian BF-BOF steel exporter. For 1 tonne of BF-BOF steel with 0.78 tCO₂/t net CBAM-liable emission intensity (2.15 − 1.37 EU benchmark), the gross CBAM obligation at €84 is approximately €65.5/t. The Article 9 deduction at Rs 700/tCO₂e (€7/t) reduces this by €7 × 0.78 = €5.46/t — reducing the net CBAM obligation to approximately €60/t. Significant but not transformative — the deduction grows proportionally as CCTS prices rise toward Phase 2 equilibrium levels of Rs 800 to 2,000/tCO₂e.
- The documentation chain required to claim the Article 9 deduction is substantial. The authorised declarant (the EU importer) must provide to CBAM Registry authorities: a declaration from the Indian CCTS obligated entity confirming the carbon price paid (through CCTS CCC purchase or compliance verification), the BEE ICM Registry reference confirming the entity’s CCTS compliance status and CCC transaction, the verified GHG emission data for the production volume corresponding to the EU export (linked to the ACVA verification opinion), and the production allocation calculation showing what fraction of the plant’s total CCTS compliance cost is attributable to the EU-exported volume. The Commission is expected to publish a standardised Article 9 declaration template in 2026 for use in the September 2027 first annual declaration.
- The Article 9 deduction applies only to Scope 1 CBAM-covered emissions for which the carbon price was paid under the CCTS. For aluminium, where Scope 2 electricity emissions are included in the CBAM embedded emission calculation, the Article 9 deduction applies only if the CCTS GEI covers the electricity Scope 2 — which it does in principle (CCTS GEI includes Scope 2 electricity for aluminium), but the CCTS’s domestic GEF-based Scope 2 calculation may not map precisely to the CBAM’s Scope 2 embedded emission methodology, creating potential differences in the deductible amount. This technical alignment issue will need Commission guidance before the first declaration cycle.
- The December 2028 Commission review of the Article 9 mechanism — mandated by the CBAM Omnibus 2025 — is the most important policy event for the CCTS-CBAM deduction framework. If the review concludes that the CCTS is sufficiently robust (verified MRV, active market pricing, transparent enforcement, legally mandated coverage), it may recommend expanding the deduction calculation to include a multiplier that partially bridges the CCTS-EU ETS price gap — making the CCTS compliance cost generate a larger CBAM deduction than the direct price parity calculation currently produces. India’s government and industry should actively engage the Commission review process to advocate for a fuller deduction methodology that recognises the CCTS as a credible, independently verified domestic carbon pricing mechanism.
Article 9 is the provision in the CBAM Regulation that, in principle, creates alignment between India’s domestic carbon pricing effort and India’s CBAM compliance burden. Its logic is straightforward: if an Indian producer has already paid a carbon price domestically — through the CCTS’s CCC purchase obligation — it should not be required to pay the full EU CBAM certificate cost for the same tonne of embedded emissions. The CBAM certificate obligation should be reduced by the extent to which the domestic carbon price has already internalised the emission cost. This is the principle of avoiding double taxation — paying for the same tonne of emissions twice, once in India and once at the EU border.
The challenge is that the implementation mechanics of Article 9 are considerably more complex than the principle. The domestic carbon price and the EU carbon price are not equivalent — India’s CCTS Phase 1 CCC price at €4 to €9/tCO₂e is far below the EU ETS at €84/tCO₂e. The documentation chain linking a specific tonne of steel production to a specific CCTS compliance payment requires data systems that few Indian exporters have yet built. And the first CBAM annual declaration — due September 2027 — will be the first time the Article 9 mechanism is operationally tested, without significant Commission guidance on the specific calculation methodology for third-country carbon prices. The gap between the principle and the practice of Article 9 is the central analytical challenge for Indian exporters trying to incorporate the deduction into their CBAM compliance planning.
The deduction calculation: how it works step by step
Gross CBAM certificate obligation on EU exports: 2 MMT × 0.78 tCO₂/t × 1 certificate/tCO₂ = 1,560,000 CBAM certificates At €84/certificate: €131.04 million gross CBAM obligation
CCTS compliance position for the plant (example: deficit entity): Plant CCTS GEI target: 2.10 tCO₂/t · Actual GEI: 2.15 tCO₂/t Shortfall: (2.15 − 2.10) × 5 MMT = 250,000 tCO₂e deficit CCCs purchased: 250,000 CCCs at Rs 700/CCC = Rs 17.5 crore = ~€1.65 mn Effective carbon price paid: €1.65 mn ÷ (250,000 tCO₂e) = €6.60/tCO₂e
Article 9 deduction calculation: Production fraction exported to EU: 2 MMT ÷ 5 MMT = 40% CCTS compliance cost attributable to EU-exported production: 40% × Rs 17.5 cr = Rs 7 cr Equivalent CBAM deduction in tCO₂e: 40% × 250,000 tCO₂e = 100,000 tCO₂e Deduction value at EU ETS €84: 100,000 × €6.60/tCO₂e = €660,000 deductible Net CBAM obligation: €131.04 mn − €0.66 mn = €130.38 mn
Net deduction as % of gross CBAM: 0.5% — modest at current CCTS prices (If CCTS price were Rs 6,000/tCO₂e → €60/tCO₂e: deduction = €6 mn → 4.6% of gross obligation)
The formula reveals two important results. First, the Article 9 deduction at Phase 1 CCTS prices is very modest — approximately 0.5 to 1 percent of the gross CBAM obligation for a typical BF-BOF exporter with a CCTS compliance shortfall and an average CCC purchase price. This is because the CCTS Phase 1 price (Rs 400 to 900/tCO₂e, or €4 to €9/tCO₂e) is only 5 to 11 percent of the EU ETS price (€84/tCO₂e) that determines the CBAM certificate value. Second, the deduction grows proportionally as CCTS prices rise — at a hypothetical CCTS Phase 2 price of Rs 6,000/tCO₂e (€60/tCO₂e), the deduction would cover approximately 4.6 percent of the gross CBAM obligation. Only if CCTS reaches EU ETS parity (which India’s Phase 2 architecture does not target) would the deduction become transformative.
Article 9 Deduction — Required Documentation and Evidence Chain
| Document | Issued By | Content Required | Status as of April 2026 |
|---|---|---|---|
| CCTS compliance declaration | Indian exporter (plant level) | Confirmation of CCTS obligation, CCCs purchased, price paid, compliance year | Template not yet published by Commission — expected H2 2026 |
| ICM Registry reference | Grid Controller of India | Registry transaction ID confirming CCC purchase quantity and date | Registry operational — exporters must register ICM accounts by June 2026 |
| ACVA verification opinion | BEE-accredited ACVA | Verified GHG emission data for relevant production period — confirms emission intensity and production volume | Available upon CCTS verification completion — June 2026 deadline applies |
| Production allocation calculation | Indian exporter | Methodology showing what % of plant’s CCTS compliance cost is attributable to EU-exported production volume | No Commission guidance yet — proportional production volume allocation expected; confirmation pending |
| CBAM declaration link | EU authorised declarant | Reference in CBAM annual declaration to Article 9 deduction, quantum, and supporting documents | First declaration due September 2027 — declaration format with Article 9 section expected in Commission guidance Q1 2026 |
India’s advocacy strategy for the December 2028 Article 9 review. The Commission review mandated by the Omnibus by December 2028 will assess whether third-country carbon pricing instruments meet the stringency and transparency requirements to justify a fuller Article 9 deduction mechanism. India’s commercial interest is in maximising the recognition of CCTS compliance costs in the deduction calculation — ideally establishing a mechanism where CCTS CCC prices at verified market rates are directly deductible from CBAM obligations at the full price-for-price exchange rate, rather than the current proportional calculation that produces very modest deductions at Phase 1 CCTS prices. The Ministry of Commerce, Ministry of Steel, and Ministry of Mines should engage India’s Mission to the EU and the European Commission’s DG TAXUD well before the 2028 review to provide evidence of CCTS robustness — verified MRV, active market price formation, enforcement track record, and transparent registry operations — that strengthens the case for fuller Article 9 deduction recognition.
Frequently Asked Questions
Can a CCTS surplus entity (one that does not purchase CCCs) claim an Article 9 deduction?
This is a legally open question under the current CBAM Regulation. Article 9 specifically references the carbon price “effectively paid” — language that appears to require an actual financial payment for carbon compliance, not a surplus that generates income. A CCTS surplus entity (one that generates CCCs and sells them) has not paid a carbon price — it has received a carbon revenue. The Article 9 deduction therefore appears not to apply to surplus entities under the current formulation. The Commission may clarify whether the implicit carbon price embedded in the CCTS GEI obligation (the economic cost of achieving the GEI target, even if the entity over-achieves) qualifies as a “price effectively paid” — but this interpretation requires Commission guidance that has not yet been issued.
Does the Article 9 deduction apply separately for Scope 1 and Scope 2 CBAM emissions for aluminium?
For aluminium, where CBAM covers both Scope 1 direct and Scope 2 indirect electricity embedded emissions, the Article 9 deduction in principle applies to the total embedded emission that is covered by CBAM and for which a domestic carbon price was paid. The CCTS GEI for aluminium covers both Scope 1 and Scope 2 — so the domestic carbon price is theoretically applicable to the full CBAM embedded emission scope. However, the CCTS’s Scope 2 uses the national GEF (CEA WAEF of 0.710 tCO₂/MWh), while the CBAM Scope 2 for aluminium may use either the national GEF or the actual emission factor of the specific electricity source. If the two Scope 2 emission factors differ (which they will for smelters with RE PPAs), the deductible quantum and the CBAM-liable quantum will not be identical. Commission guidance on this misalignment is needed before the first declaration cycle.
What is the earliest a CBAM Article 9 deduction could be claimed by an Indian exporter?
The first CBAM annual declaration covering calendar year 2026 imports is due 30 September 2027. This declaration is where Article 9 deductions for 2026 imports would first be claimed. For an Indian exporter to claim the deduction in this declaration, it must have: completed CCTS compliance for FY2025-26 (June 2026 deadline), obtained the BEE ICM Registry reference for any CCCs purchased, had its GHG emission data verified by an ACVA, prepared the production allocation calculation, and provided this documentation package to its EU importer in time for the EU importer (authorised declarant) to incorporate it into the September 2027 annual declaration. Given the Commission has not yet published the Article 9 declaration template, the practical first deduction cycle is more likely to be for 2027 imports (first declared September 2028) — by which time Commission guidance, CCTS registry infrastructure, and declarant experience should all be more developed.
Sources
- European Commission — CBAM Regulation EU 2023/956 — Article 9: Carbon price paid in a third country
- European Commission — CBAM Implementing Regulation 2023/1773 — embedded emission methodology and Article 9 guidance
- Ministry of Power — Carbon Credit Trading Scheme — CCTS rules and ICM Registry framework
- European Commission — CBAM TAXUD guidance — Article 9 deduction calculation methodology
- Regulation EU 2025/2083 — CBAM Omnibus — Article 9 review mandate by December 2028