The changing global trade landscape is increasingly shaped by climate-linked regulatory measures, making carbon pricing an important policy consideration for India. The European Union’s Carbon Border Adjustment Mechanism requires importers to report embedded emissions and disclose carbon prices already paid in the country of origin. With the United Kingdom also expected to implement a similar mechanism, estimating India’s effective carbon price has become necessary for trade competitiveness and compliance.

India already applies implicit carbon tax through measures such as the clean energy cess and excise duties on fossil fuels, which function as Pigouvian taxes by placing an indirect price on emissions. Assessing the quantum of existing carbon taxes is critical for designing a coherent domestic carbon pricing strategy, particularly in the context of operationalising the Carbon Credit Trading Scheme. Such estimation can provide a benchmark for carbon price discovery, help align market-based mechanisms with existing implicit carbon taxation, and support policy decisions on sectoral coverage, pricing signals, and transition pathways. It can also strengthen India’s reporting under international trade regimes while reinforcing its climate commitments in the context of global stocktake outcomes and the broader energy transition.