Can India and the EU forge a successful green partnership in the face of global challenges?

India-EU relations We are at a pivotal moment. Prime Minister Narendra Modi and European Commission (EC) President Ursula von der Leyen have committed to concluding FTA negotiations this year and holding a summit in the first quarter of 2026 that will set a new direction for a bilateral strategic partnership. At a time when the United States pursues aggressive unilateral policies and China dominates critical manufacturing sectors, EU-India action can be a catalyst for achieving global public goods that require North-South cooperation. It would also contribute to economic security by promoting more diversified green value chains.

This requires putting the green economy at the center of a more strategic bilateral engagement. India must reap the benefits to its economy from increased investments in the green economy. Likewise, the EU should avoid excessive focus on unilateral action and inward-looking industrial policies. Both parties have a common interest in cooperating in a partnership that helps them accelerate their transition to net zero emissions and build a common green value chain through win-win technology collaborations and European investments.

Currently, EU-India climate cooperation is hampered by conflicts over the EU CBAM and limited engagement in the COPs. The FTA is not the appropriate forum to change the dynamics of discussions on trade-related climate measures. Although it is possible to strengthen the climate component of an investment agreement, which is the necessary complement to the FTA, it is unclear when such an agreement could be concluded.
Instead, the issue of a green economy partnership must be discussed at leadership level and be a major focus of next year’s EU-India summit. A partnership on decarbonization must focus on:

Cooperation on carbon pricingtrade and climate interface
This work will examine how the EU can support the development of the Indian Carbon Credit Trading System (CCTS), building on the indication that the CCTS could be credited for the purposes of CBAM implementation.

It will examine how India can help Europe build its digital public infrastructure capabilities with the aim of verifying and tracking emissions to offer a practical solution to reduce compliance burdens for MSMEs. To facilitate interoperability between the two parties’ carbon pricing systems, the work should include carbon accounting methodologies. It should identify the modalities of revenue sharing with the common objective that the resources generated by the CBAM are mobilized to support decarbonization projects in India.

Support green investments
The EU and India should consider a new architecture to support green investments, combining instruments for domestic and external resource mobilization and financial risk reduction, encompassing public banks, private financing, foreign exchange and insurance pools.

The aim should be to identify, in cooperation with industry, areas where European and Indian companies could invest in projects contributing to clean energy, decarbonization and adaptation. This could range from investments in renewable energy and electric vehicles to chip design, power electronics and green iron ore.

The work should also consider how to facilitate such investments. This could be incorporated into a new type of investment protection agreement. To create a stable source of demand, both sides should discuss the implementation of green industrial policies and examine how investment projects can be designed to benefit from different forms of incentives for major green markets (green procurement, consumer subsidies, auctions).

Information and advice
Mutual trust and cooperation can be achieved by including in the investment agreement an investor facilitation mechanism to resolve interstate issues, and by creating an ongoing dialogue in which each party provides early information and receives consultative feedback on regulatory measures.

Next year’s summit may agree to establish a high-level joint working group to prepare action-ready recommendations for consideration at the 2027 EU-India summit. The working group is expected to bring together senior officials from all key services, both in India and the EC. The work is expected to be led by a sherpa appointed by Modi and Von der Leyen. The task force is also expected to consult with the private sector, academics and think tanks.

There is nothing abstract in this vision. For example, Europe and India face strategic challenges in their iron and steel sectors. But each camp’s policy addresses risks that will be economically inefficient and counterproductive in terms of decarbonization. Cooperation could solve problems, generate bilateral benefits and promote global public goods.

We don’t expect a Euro-Indian love at first sight. But consensual arranged marriages can be successful. If India seeks a stable partner and Europe is willing to share its future with a young, energetic partner, then, instead of a long-debated question of principle, differential responsibilities and capabilities could become a win-win recipe.