A new study by Net Zero Tracker, a global network of research institutions at the University of Oxford, cautions that India's exports are becoming increasingly vulnerable with the strengthening climate regulations in key world markets. The study states that more than two-thirds of India's exports are now at risk of net-zero regulations being adopted by the UK and the European Union (EU), among others.

During the financial year 2024–25, India has shipped goods and services valued at $824.9 billion, which constitutes almost 20% of the nation's GDP. But since most of India's electricity is still generated using coal, which is approximately 75%, the exported goods and services such as steel, cement, and even IT services carry a high carbon footprint.

Nations such as the EU are proposing "carbon border adjustment mechanisms" a form of tax or tariff that will be levied on imported products based on the amount of carbon emissions used during their manufacture. These regulations are due to enter into force by 2026, and they may increase the cost of Indian exports and make them less competitive, particularly if they are deemed to be "carbon intensive."

The study points out that some of India's global competitors are producing the same goods with much lower emissions—up to 20 times more carbon-efficient—mainly because they use cleaner energy sources. This gives them an edge in markets where climate regulations are getting stricter.

India is already in negotiations for trade agreements with nations such as the UK and the US, but these arrangements may also be impacted by the extent to which India measures up to climate targets.

To do this, India has pledged to achieve net-zero emissions by 2070. A draft taxonomy for sustainable finance has already been published by the government, which will assist in directing investment into low-carbon, clean industries. A new climate goal for the country is also being proposed ahead of the COP30 climate summit in Brazil in November 2025.

Source: Reuters