New Delhi, Jan. 21 -- India and the European Union will adopt a middle-path to resolve the carbon tax issue and conclude their ongoing free trade negotiations before their leaders meet next week with Brussels likely to recognise India's efforts in reducing carbon footprints that could be leveraged to offset Indian exporters' liabilities under the Carbon Border Adjustment Mechanism (CBAM), people aware of the development said. The two teams are converging on a mutually-beneficial middle-path by abandoning their respective hard stands on CBAM - India considers it a non-tariff barrier (NTB) that would nullify gains of tariff reductions for most of its key exports such as steel, cement, aluminium, fertiliser, electricity and hydrogen, they said requesting anonymity. For the EU, it is part of its domestic Emissions Trading System (ETS), hence cannot be waived off completely, they added. ETS requires polluters to pay for their greenhouse gas emissions. One of the solutions is to align the EU and the Indian methodologies of measuring emissions, as India already has the Carbon Credit Trading Scheme (CCTS) for energy-intensive sectors such as steel and cement and programmes such as the National Green Hydrogen Mission. This could offset significant costs incurred by India from its CBAM liabilities as per Article IX of the EU CBAM Regulation, they said. Article IX allows an offset for carbon price paid in a country of origin. The other solution rests in a time and sector-specific moratorium so that the industry has time to invest in clean technology, they said. "It is also possible that after a broad consensus on CBAM before January 27, its operational details could be worked-out later," one of the people said, adding that a complete waiver from CBAM is unlikely. It is expected that the proposed pact may have a rebalancing mechanism that would allow India to proportionately reduce FTA benefits (in terms of tariff reduction) to the EU's exporters if CBAM is used as a non-tariff barrier, they said. Such measures are necessary to protect Indian industries, particularly SMEs, they said. The recently-signed India-UK FTA has a rebalancing mechanism that allows India to proportionately withdraw benefits under the pact if Britain's proposed CBAM in 2027 adversely impacts Indian exports....