EU to Provide €500 Million to Bolster India’s Climate and Sustainable Trade Goals

The European Union (EU) plans to provide €500 million in support to India over the next two years to help lower greenhouse gas emissions and support industrial transition, the European Commission said on January 27, 2026.  

The funding will be subject to EU budgetary and financial procedures. The support is expected to be directed towards climate mitigation projects, cleaner industrial processes and trade-related sustainability measures. 

Free Trade Agreement Context 

The announcement followed the conclusion of negotiations on an India–EU free trade agreement on January 27, 2026.  

The proposed agreement includes a trade and sustainable development chapter that covers environmental protection, climate commitments, labour standards and women’s empowerment.  

It also sets out a framework for dialogue and cooperation on trade-related climate and environmental issues. 

High-level Engagement and Cooperation Platform 

The funding plan was discussed during meetings in New Delhi involving European Council President Antonio Costa, European Commission President Ursula von der Leyen and Prime Minister Narendra Modi.  

As part of the engagement, India and the EU plan to sign a Memorandum of Understanding to establish an EU-India climate cooperation platform.  

The platform is expected to be launched in the first half of 2026 and will focus on policy coordination, technical assistance and capacity building. 

Carbon Border Tax and Sector Exposure 

India has not received any exemptions from the EU’s Carbon Border Adjustment Mechanism, which applies uniformly across countries.  

The mechanism was introduced on October 1, 2023, and is set to translate into a 20-35% levy on select imports from 1 January, 2026, as the EU targets net-zero emissions by 2050.  

Covered sectors include cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. India’s iron and steel, aluminium and cement sectors are expected to face the highest exposure. Indian firms may receive technical assistance to meet compliance requirements. 

Read More: Moody’s Sees India–EU Trade Pact Supporting Manufacturing and Investment! 

Conclusion 

The €500 million support plan and the sustainability chapter in the proposed trade agreement outline how climate-related measures are being incorporated into the bilateral trade framework. The carbon border mechanism is expected to affect Indian exporters in covered sectors, with technical cooperation forming part of the ongoing engagement. 

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.   
 
Investments in the securities market are subject to market risks, read all the related documents carefully before investing.-