The Netherlands tells New Delhi there will be no renegotiation of Europe’s carbon border levy, offers compliance help for Indian small exporters instead, and puts the India EU trade deal on a December signature and spring implementation
THE HAGUE, October 26, 2026 – The Netherlands has ruled out any renegotiation of the European Union’s Carbon Border Adjustment Mechanism, closing the door on India’s central ask in the final stretch of negotiations over the two sides’ free trade agreement.
Dutch Minister for Foreign Trade and Development Cooperation Sjoerd Sjoerdsma, speaking in The Hague on Monday during a visit by Indian Commerce and Industry Minister Piyush Goyal, said the mechanism is necessary and will not be reopened. “I don’t think there will be any renegotiation of CBAM because we view it as a necessary measure,” he said, citing the Paris Agreement, in remarks carried by the Indian wire agency ANI.
He coupled the refusal with an offer. The Netherlands would support Indian small and medium sized enterprises in meeting European compliance requirements, he said, acknowledging the burden the rules place on small firms: “if you have a small company, you have a lot of other things to do than just read all those guidelines.” He added that rules which hinder trade unnecessarily should be looked at, a formulation that leaves room for procedural simplification while preserving the mechanism itself.
On the trade agreement, Sjoerdsma was more forthcoming than European officials have generally been. “We hope that this will be signed in December, and we hope that implementation will follow as soon as possible,” he said, before adding: “I don’t have my crystal ball as to the exact date.” He expressed hope that implementation would follow in spring of next year.
A single sourcing caveat applies: the remarks were reported by one wire agency and republished by Indian outlets, with no corroborating Dutch government statement available. The occasion at which they were made was not specified in the reporting.
What India wanted
India has spent two years seeking relief from the carbon border mechanism, and the ask has taken several forms: exemption for small exporters, recognition of Indian carbon pricing, a transition period, or a rebate mechanism inside the trade agreement itself.
The commercial stake is specific. India’s exports to the European Union of goods covered by the mechanism were worth 5.30 billion euros in 2025, representing 4.8 percent of extra European imports of covered goods by value. Of that, iron and steel accounted for 4.39 billion euros, roughly 83 percent of the total, with aluminium at 903.9 million euros, fertilizers at 4.4 million euros and cement under 1 million euros.
The trend was already downward before charging began. Indian iron and steel exports to the bloc fell from 4.60 million tonnes in 2024 to 4.01 million tonnes in 2025. India ranked fifth by quantity among suppliers of covered steel, at 6.9 percent of extra European imports, and third by value.
The cost of the mechanism at current certificate prices is substantial. Certificates were priced at 75.36 euros per tonne of carbon dioxide equivalent in the first quarter of 2026, 75.28 euros in the second and 82.32 euros in the third. At the third quarter price, using default emission values, hot rolled flat steel carries a mechanism cost of 277.60 euros per tonne in 2026, rising to 315.66 euros in 2027, 356.53 euros in 2028 and 399.95 euros by 2030. Unwrought aluminium runs from 55.12 euros per tonne in 2026 to 139.79 euros in 2030.
On a product whose delivered price sits in the hundreds of euros per tonne, a carbon charge of that order is not a surcharge. It is a second price.
The carbon pricing gap
The mechanism allows a deduction for carbon prices already paid in the country of origin. India has not secured recognition under that provision.
India’s Carbon Credit Trading Scheme covers roughly 490 entities across seven sectors, and emission intensity targets for steel were still in draft following an environment ministry notification in June 2026 with a 60 day comment window. Until a recognised domestic carbon price exists and is accepted by Brussels, Indian exporters pay the full European certificate price with no offset.
That is the technical core of the dispute, and it is also the most likely route to a resolution that does not require reopening the regulation. A functioning Indian carbon market, recognised under the mechanism’s own terms, would reduce Indian liability without any change to European law. The Dutch position, read carefully, points in exactly that direction: no renegotiation, but help with compliance.
Goyal’s harder line
Goyal’s own language earlier in the week was considerably sharper than anything said in The Hague.
At the Berlin Global Dialogue on October 23, he told a European audience that Europe had imposed the mechanism on itself, and on climate finance he said that eleven years later, in his words, no money had been seen. Reporting of the same appearance quoted him warning that the European Union was inviting disaster with the mechanism, and that in a reciprocal world, trading partners could answer European regulation with regulation of their own.
By Monday in The Hague the register had changed. Goyal met Dutch Minister of Economic Affairs and Climate Policy Heleen Herbert and posted that the two had discussed semiconductors, green hydrogen, the clean energy transition, critical minerals and advanced manufacturing, and had explored leveraging the India EU free trade agreement to expand trade flows and build resilient supply chains.
The shift between Berlin and The Hague is not inconsistency. It is the normal rhythm of a negotiation entering its final phase, in which public positioning for a domestic audience and private accommodation with a partner run in parallel. Goyal’s Netherlands visit ran from October 24 to 27, following a German leg that concluded in Berlin on October 24.
The negotiation timetable
Negotiations on the India European Union free trade agreement concluded in January 2026. The Commission submitted signature and conclusion proposals to the Council in September. The third ministerial meeting of the India EU Trade and Technology Council was held in Brussels in July 2026, adopting an action plan for 2026 and 2027 with carbon border cooperation on the agenda.
Indian officials have said the agreement contains an annexure addressing the carbon mechanism with an associated work plan. That is a different thing from an exemption, and the Dutch comments confirm how different. A work plan commits the parties to talk. It does not suspend a charge.
If the December signature and spring 2027 implementation timetable holds, Indian exporters will gain tariff preferences into the European market at almost exactly the moment the carbon mechanism’s costs begin to bite in full. Certificate sales start on February 1, 2027, and the first declaration covering 2026 emissions is due on September 30, 2027. From 2027 certificate pricing moves from a quarterly average to a weekly one, which removes the planning cushion exporters have had during the first year.
For steel and aluminium exporters, the two flows that dominate India’s covered trade, the net effect may be close to neutral or negative. A tariff preference worth a few percentage points does not offset a carbon charge of several hundred euros per tonne.
The legal challenge
The mechanism is under challenge at the World Trade Organization, and the procedural history shows how slowly that route moves.
Russia requested consultations on May 12, 2025. The European Union declined on May 22, 2025, saying consultations could not be fruitful. Russia requested a panel on July 10, 2026. The Dispute Settlement Body deferred establishment on July 24 and established the panel on September 25, 2026.
Twenty seven members reserved third party rights: Argentina, Australia, Brazil, Canada, China, Colombia, Ecuador, Iceland, India, Indonesia, Japan, Kazakhstan, Korea, Malaysia, New Zealand, Norway, Paraguay, Saudi Arabia, Singapore, South Africa, Switzerland, Turkiye, Chinese Taipei, Thailand, the United Arab Emirates, the United Kingdom and the United States.
That list is the story. A panel requested by Russia would ordinarily attract limited interest. Twenty seven third parties, including every major developing country exporter of carbon intensive goods, signals that the membership regards this as the test case for border carbon measures generally. Panel composition had not been published as of Monday.
Even on an optimistic timetable, a panel report would not arrive before 2028, and with the Appellate Body still non functional, any appeal would go into the void unless the parties agreed to arbitration. Legal challenge is therefore not a near term constraint on the mechanism. It is a long term uncertainty that does nothing for an exporter pricing a 2027 contract.
The scope fight in Brussels
Meanwhile the mechanism is expanding. The Commission tabled a proposal in December 2025 to extend coverage to roughly 180 downstream products. The Council agreed a general approach in June 2026 adding 202 eight digit codes and deleting three medical device entries. Parliament adopted its mandate on September 15, 2026 by 464 votes to 50 with 159 abstentions, after an environment committee vote in July.
The first trilogue took place on October 20. Reporting on the outcome conflicts: some accounts described the talks as ending without agreement, with a second round set for November 30 and institutions targeting a deal before the end of the year, while others characterised the first session as raising no major issues. No institutional readout settles the question.
Four technical issues went to further work: the de minimis threshold for aluminium, where Parliament proposes 5 tonnes against an existing 50 tonne threshold; the treatment of metal scrap as a precursor, where Parliament deleted the steel scrap row and would make all aluminium scrap including post consumer material a precursor; monitoring of the 50 tonne threshold in distance sales and online platforms; and the use of global or country level default values for high risk combinations of origin and goods.
European industry wants the widest possible extension. On October 20, EUROFER, EUROMETAL, Eunipra, industriAll Europe and Steel for Packaging Europe, together with 19 other associations, urged the broadest possible downstream coverage, arguing that products covered by the mechanism will benefit from a more level playing field supporting their continued production in Europe.
What exporters should do
For exporters outside the European Union, four points follow.
Model the mechanism at the default values and assume no origin country carbon credit until one is formally recognised. Default values are deliberately conservative and produce a higher charge than verified actual emissions in most cases, which means investing in verified emissions data is usually worth more than lobbying.
Treat the downstream extension as probable rather than possible. An exporter of finished goods containing European covered inputs should be mapping exposure now, because the scope list is being negotiated in weeks rather than years.
Watch the de minimis threshold. A move from 50 tonnes to 5 for aluminium would pull a large number of small shippers into the regime for the first time, and small shippers are the least prepared.
Do not plan around the dispute settlement case. It will not resolve inside the planning horizon of any current contract.
How the mechanism actually charges
Understanding the Indian complaint requires understanding the charging structure, which is more punitive in its default settings than most summaries convey.
An importer into the European Union of a covered good must surrender certificates corresponding to the embedded emissions of that good, priced at the weekly or quarterly average of the European emissions trading system auction price. Embedded emissions may be calculated using verified actual data from the producing installation, or, where that data is unavailable or inadequate, using default values set by the Commission.
The default values are deliberately set at a conservative level, reflecting high emission intensity production. An exporter who cannot or will not produce verified installation level data therefore pays more than an exporter who can, and in most cases materially more. That design is intentional: it creates an incentive to measure and report rather than to litigate.
For Indian steel exporters the practical consequence is that the mechanism’s cost depends less on the European certificate price than on whether the exporting mill has installation level emissions data that satisfies a European verifier. Integrated blast furnace production in India is emissions intensive by international standards, driven by coal based direct reduction and a grid with high fossil content, so even verified data will produce a substantial charge. But the gap between verified and default values is often worth tens of euros per tonne, and it is entirely within the exporter’s control.
The small exporter problem
Sjoerdsma’s acknowledgement that small companies have other things to do than read guidelines is the most substantive concession in his remarks, because it identifies the mechanism’s real distributional effect.
Compliance requires emissions accounting at installation level, a chain of documentation from producer to importer, and in due course verification by an accredited verifier. Large exporters with European subsidiaries, compliance departments and existing environmental reporting can absorb that. Small exporters cannot, and the fixed cost of compliance falls on them as a share of turnover many times larger than on a major mill.
The result is predictable: the mechanism accelerates consolidation among exporters to Europe, independent of its effect on emissions. Smaller Indian engineering goods and aluminium product exporters are already reported to be withdrawing from European business rather than building compliance capacity for a market that may represent a modest share of sales.
That is the effect the Dutch offer of compliance assistance is aimed at, and it is a sensible target. It is not, however, a substitute for what India asked for. Assistance with paperwork reduces the fixed cost of compliance. It does not reduce the certificate charge, which is the variable cost and the much larger number.
What a recognised carbon price would be worth
The mechanism’s deduction for carbon prices paid in the country of origin is the single largest lever available to India, and the figures show why.
If India’s Carbon Credit Trading Scheme were to establish a recognised and enforced carbon price covering steel production, Indian exporters could deduct that price from their European certificate liability. The deduction is for the price actually paid, so its value depends entirely on the level at which the Indian market clears.
At a notional Indian carbon price of 10 euros per tonne of carbon dioxide against a European certificate price above 80 euros, the deduction would reduce liability by roughly an eighth. At 30 euros it would reduce it by more than a third. At European levels it would eliminate it.
That is the structural choice the mechanism forces on every exporting country, and it is the design intention stated openly by its architects: either pay the carbon price at the border to the European Union, or pay it at home and keep the revenue. India’s scheme currently covers roughly 490 entities across seven sectors with steel emission intensity targets still in draft, which means the revenue is being left on the table for now.
The politics of that choice are difficult in New Delhi, where a domestic carbon price is read as a European imposition on a development agenda, and the BRICS environment ministers in August described carbon border measures as unilateral, punitive, discriminatory and protectionist. But the arithmetic does not change with the framing.
Third country responses
India is not alone, and the range of responses now visible across affected exporters gives a map of what works.
Turkiye has moved furthest toward the accommodation route, developing an emissions trading system explicitly designed to be recognisable under the European mechanism, on the logic that an exporter sending the bulk of its covered goods to Europe is better off collecting the carbon price itself. Turkiye’s geographic concentration on the European market makes that calculation easy.
China has pursued a mixture, expanding its national emissions trading system into steel, cement and aluminium while objecting to the mechanism in multilateral forums. Brazil and South Africa have concentrated on the multilateral objection, with South Africa in particular pressing the development finance argument at successive climate conferences.
Russia has litigated, and the dispute settlement panel established in September is the result. The breadth of third party participation, 27 members including almost every significant developing country exporter of carbon intensive goods, indicates that the membership intends to use the case to test the compatibility of border carbon measures with trade rules generally, whatever the merits of the complainant.
None of these routes delivers relief inside the next two years. The accommodation route delivers the most, and it delivers it to the exporting country’s own treasury rather than to Brussels.
The negotiation this leaves
What the Dutch intervention clarifies is the shape of the bargain actually on the table for India, as distinct from the one Indian industry has been asking for.
There will be no exemption and no renegotiation. There may be procedural simplification, assistance with small enterprise compliance, technical cooperation on emissions measurement and verification, and a work plan inside the trade agreement that keeps the subject open. There is a route to substantive relief, but it runs through a recognised Indian carbon price rather than through a European concession.
For Indian exporters planning 2027 shipments, the operational conclusion is that the mechanism should be treated as a fixed feature of the European market, priced into contracts, and mitigated through verified emissions data rather than through expectations of political relief. The trade agreement, if signed in December, will improve tariff treatment. It will not change the carbon charge.
What to watch
The December signature of the India European Union agreement is the near term marker, followed by the ratification sequence that determines whether spring 2027 implementation is realistic. The second carbon mechanism trilogue on November 30 will show whether the downstream extension lands this year. And the publication of the fourth quarter certificate price, due on January 4, 2027, will set the baseline against which 2027 exposure is calculated.