The EU's Carbon Border Adjustment Mechanism (CBAM) is indeed creating significant teething issues for Indian exporters, even post the India-EU FTA signed in January 2026. CBAM imposes carbon levies on imports like steel, aluminium, cement, and fertilisers, with no exemptions under the FTA, forcing Indian firms to submit verified emissions data or face punitive default values that inflate costs by €400-500 per tonne. Key challenges include inadequate emissions monitoring infrastructure among MSMEs, complex supply chain data gaps, and a shortage of EU-accredited verifiers in India, leading to compliance delays and higher expenses. Exports of steel and aluminium to the EU have already dropped 24-35% YoY in early 2026 due to these hurdles, eroding competitiveness despite tariff cuts covering 96.6% of EU goods. The FTA offers technical dialogues, verifier alignment, and future MFN flexibilities, but industry warns of 10% engineering export declines without faster decarbonisation. India pushes for WTO-compliant recognition of its carbon market, yet green protectionism persists.