India's export engine faces carbon headwinds as net-zero rules tighten, study says

India's exports are increasingly vulnerable to climate-linked risks, with over two-thirds of outbound shipments exposed to tightening net-zero regulations in major markets, a study by Net Zero Tracker, a coalition of research groups at the University of Oxford, showed on Thursday.

In 2024-25, India exported goods and services worth $824.9 billion, according to data from the Reserve Bank of India. The exports accounted for about a fifth of India's GDP.

The UK and European Union are rolling out stricter carbon policies, including carbon border adjustment mechanisms, which are tariffs on greenhouse gas emissions associated with production of certain imported goods.


"High carbon emissions are fast becoming a trade risk and India's exports are already under pressure to decarbonise," Net Zero Tracker said.

"For India, the challenge is clear: maintain and grow export competitiveness while slashing embodied emissions across sectors."

Coal powers nearly three-fourth of India's electricity grid, which inflates emissions across both goods and services, including its flagship IT and professional services sectors, said Net Zero Tracker.

Meanwhile, rival exporting countries are supplying the same markets up to 20 times more efficiently in carbon terms, largely due to cleaner energy systems, as per the study.

India is in the midst of negotiating trade deals with key partners, including the UK and the U.S.

But carbon border adjustment mechanisms, set to take effect in Europe from 2026, could impose tariffs on carbon-intensive imports, threatening India's access to these markets, said Net Zero Tracker.

India has pledged to reach net zero emissions by 2070, and earlier this year released a draft sustainable finance taxonomy to channel investment into low-carbon sectors.

A new national emissions-reduction target is also expected ahead of the COP30 climate summit in Brazil this November.