India's exports and jobs hinge on accelerating the clean transition
Analysis finds India’s coal dependence could slow rapid growth sectors — from Professional Services to Manufacturing — which are exposed to active and incoming carbon policies.
23 JUL 2025
New Delhi, Thursday 24 July 2025: India’s increasing solar potential, young workforce and cost competitive industries could help it become a leader of the clean economy. But its coal dependence is leaving the world’s fastest growing major economy increasingly exposed as trade partners — including the EU and UK — extend carbon pricing to cover high emission imports, and multinational companies shift to low-carbon supply chains, according to Net Zero Tracker analysis.
The report, Carbon Competitiveness: India at the Net Zero–Trade Nexus, finds that unless it accelerates decarbonisation, India’s exports will be increasingly exposed to penalties on carbon-intensive goods — putting billions in trade revenue and millions of jobs at risk as climate policies expand in breadth and depth.
Key findings:
India’s export engine runs on net zero markets: 68% of India’s $446bn in exports — supporting 32 million jobs — go to net zero-committed countries. Over half (55%) are to countries with net zero targets enshrined in law or official policy documents.
Carbon inefficiency is a competitive risk: India’s $150bn Professional Services sector (including high value sectors such as IT outsourcing and call centres) ranks among the most carbon-intensive globally per million dollars of output. Competitor countries can serve the same markets up to 20 times more carbon efficiently.
Export-related jobs will become increasingly exposed: 7.5 million Indian jobs depend on exports to markets with active Carbon Border Adjustment Mechanisms (CBAMs), such as the EU (1). Another 4.7 million jobs are linked to countries planning or considering similar measures.
Global firms are decarbonising supply chains: 231 major multinational companies in India’s 10 top export markets — with combined annual revenues of $8.1tn — have Scope 3 coverage, meaning they will increasingly shift toward lower-carbon suppliers.
“India risks ceding exports and investment to lower-carbon rivals including China, Vietnam and Indonesia just as demand for clean products and data centres surge. But with renewables now outpacing coal and emissions intensity falling, cleaner manufacturing and services are within sight — if energy, trade, and industrial policy align.”
India’s export competitiveness will begin to hinge not just on cost and scale, but on emissions performance over time. With the Trump administration driving supply chains away from China, India has an opportunity to grow its manufacturing and tech sectors. But the report finds that emissions from India’s computer, electronics, and optical products sector are five times higher than Vietnam’s, putting it at a disadvantage with tech companies like Microsoft and Google that require low carbon suppliers to meet their net zero and 100% renewable energy targets.
Key sectors facing risk — and opportunity: While carbon intensity poses clear risks, India is uniquely positioned to capture a larger share of global trade by combining cost competitiveness with cleaner production.
Professional Services and IT services sectors are India’s largest export industries in dollar terms, collectively creating $155bn (23% of total export value), and 9.2 million jobs. Yet, due to India’s high embodied emissions, the sector generates more CO2 per million dollars of output than 97% of countries (where data is available).
Steel and Aluminium together account for over 20% of India’s export value, but these sectors are among the most carbon-intensive globally, facing steep CBAM penalties in the EU, UK and potentially the US in light of its proposed ‘Foreign Pollution Fee Act.’
The Textiles sector, which generates 5.5 million domestic jobs and 6.5% of India’s export value, faces increasing scrutiny from global brands with Scope 3 targets — such as H&M and Nike — which require suppliers to decarbonise. 62% of India’s textiles exports go to jurisdictions with net zero targets.
India is both the world’s second-largest coal consumer and the fastest-growing renewables market, targeting 500 GW of clean power by 2030. The report states that coherent policy is vital to accelerate the phase out of coal and boost industrial decarbonisation — and urges developed nations, especially the EU, to increase financing for India’s transition.
Implications of the EU CBAM
The EU accounts for more than 17% of India’s total trade value, supporting nearly 7.5 million Indian jobs. Yet India’s $5.7 billion of exports to the EU now face rising costs under the CBAM (equating to 8% of India’s total exports to the EU, which directly support 143,000 jobs).
The carbon measure will be fully implemented in 2026 across iron and steel, aluminium, cement, fertilisers, hydrogen, and electricity — and will expand in scope over time.
India’s industries face a choice: accelerate clean growth to secure exports and investment — or risk losing market share and jobs to lower carbon competitors.
Adair Turner, Chair of the Energy Transitions Commission, commented:
“Until there is a global carbon price on hard-to-abate sectors, Carbon Border Adjustment Mechanisms (CBAMs) are essential for developed countries to take responsibility for emissions embedded in their imports. But to be fair and effective, CBAMs must not be protectionist and should be designed with measures that provide technical support and climate finance to help countries like India decarbonise without slowing development. India is well-positioned to become a global leader for low-carbon manufacturing with its talent, industrial scale, and immense solar potential.”
Commenting on the recent UK–India trade deal, Matt Elliott, Consultant, the Net Zero Tracker (Energy and Climate Intelligence Unit), said:
“This week’s historic UK and India trade deal is a significant step in the reshaping of global trade relationships. Yet, notably, the UK’s proposed carbon border adjustment mechanism (CBAM) – was left out of the agreement.
“When the UK CBAM comes into force in 2027, around $520 million in Indian goods — including steel, aluminium, and cement — will be directly affected. That’s 4% of total goods exports to the UK, supporting 18,000 jobs.
“Without a clean transition strategy, supported by wealthier countries including the UK, these sectors risk losing competitiveness as low-carbon supply chains become the global norm.”
The analysis underscores that India’s own economic strategy — faster grid decarbonisation, modernised industrial policy, and a focus on low-carbon exports — will be decisive in protecting jobs, sustaining growth, and positioning the country as a clean energy leader in the next decade. It also notes that, to make a global transition possible, economically advanced regions, particularly the EU, have a responsibility to support emerging economies such as India.
For CBAMs and other carbon-related trade measures to be accepted as fair and legitimate, they should be accompanied by long-standing financial, technical and capacity-building commitments under the UNFCCC and Paris Agreement. This includes concessional and grant-based support to help emerging economies to implement a just transition and decarbonise without compromising development, the report says.
Footnotes:
(1). Although it will expand its scope over time, the EU CBAM currently targets the most emissions-intensive and trade-exposed sectors: iron and steel, cement, aluminium, fertilisers, hydrogen and electricity.
About the analysis:
This report draws from the Net Zero Tracker’s unique, global dataset of climate commitments by national and subnational governments, and companies. The analysis cross references these commitments with a (i) global trade flows, (ii) employment, and (iii) emissions data to offer new insights into the risks and opportunities for India’s trade, mainly exports. The NZT database compiles data on the net zero targets of more than 4,000 global entities, including all nations that are parties to the UNFCCC, every region in the largest 25 emitting nations, all cities with more than 500,000 inhabitants, and the world's largest 2,000 publicly-listed companies by annual revenue.
About The Net Zero Tracker (NZT):
The Net Zero Tracker is the most comprehensive and up-to-date database of public net zero commitments made by nations, states & regions, cities and major companies. It includes:
all UNFCCC member states and a selected number of territories;
subnational states & regions in the 25 largest emitting countries;
all cities around the world with populations over 500,000;
publicly listed companies that were listed in the Forbes Global 2000 in 2020;
100 of the world’s largest private companies.
Using a combination of automated web data-scraping and manual searching by volunteer data analysts working in a range of languages, the NZT gathers and collates data on the status of net zero targets and robustness parameters across 4000+ entities. NZT comprises The Energy & Climate Intelligence Unit (ECIU); Data-Driven EnviroLab (UNC); NewClimate Institute; and Oxford Net Zero.
About The Energy and Climate Intelligence Unit (ECIU):
The Energy and Climate Intelligence Unit (ECIU) is a non-profit organisation that supports informed debate on energy and climate change issues in the UK. The ECIU supports journalists, parliamentarians and other communicators with accurate and accessible briefings on key issues, and works with individuals and organisations that have interesting stories to tell, helping them connect to the national conversation.
