EU to provide €500M to help India cut greenhouse emissions
What's the story
The European Union (EU) has announced plans to provide €500 million ($540 million) in financial support to India over the next two years. The funding is aimed at helping India reduce greenhouse gas emissions and accelerate its long-term industrial transformation toward sustainability. The announcement was made by the European Commission on January 27, and is subject to the bloc's budgetary and financial rules.
Trade pact
EU-India trade agreement includes sustainability chapter
The announcement of financial support comes alongside the conclusion of negotiations for a free trade agreement between the EU and India. The deal features a dedicated chapter on trade and sustainable development, aimed at enhancing environmental protection, combating climate change, protecting workers' rights, empowering women, and providing a platform for dialogue on trade-related environmental issues.
Climate cooperation
EU-India platform for climate action to be established
As part of the new partnership, the EU and India will also sign a Memorandum of Understanding (MoU) to create an EU-India platform for cooperation and support on climate action. The platform is expected to be launched in the first half of 2026. However, it remains unclear if India has secured any direct exemptions from the EU's carbon border adjustment mechanism (CBAM) under this trade deal.
Carbon tax
EU's CBAM and its potential impact on India
The EU introduced CBAM on October 1, 2023. The tax will be imposed at a rate of 20-35% on certain imports from January 1, 2026. The move is part of the EU's strategy to achieve net-zero greenhouse gas emissions by 2050. Sectors such as cement, iron and steel, aluminium, fertilizers, electricity and hydrogen are covered under CBAM. India's iron and steel, aluminium and cement industries may be hit the hardest by this carbon tax.