Carbon Credits for India's Tyre and Rubber Makers: What CBAM and EUDR Do and Don't Solve
India's tyre industry closed FY 2025-26 with record exports of ₹27,312 crore, a 9% rise on the previous year, against an industry turnover of roughly ₹1 lakh crore. Exports now account for more than a quarter of sector revenue. That export intensity is why tyre and rubber companies are fielding climate questions from three directions at once — India's compliance carbon market, the EU's carbon border levy, and the EU's deforestation rules. Carbon credits answer one of those three. Knowing which one saves real budget.
The tyre sector is not a CCTS obligated entity
India's Carbon Credit Trading Scheme covers nine notified sectors: aluminium, cement, chlor-alkali, fertiliser, iron and steel, pulp and paper, petrochemicals, petroleum refinery and textile. Tyre and rubber manufacturing is not among them. Roughly 490 entities across seven of those sectors hold binding greenhouse gas emission intensity targets for the FY 2025-26 compliance year, with Form A filings due by 31 July 2026.
What that means in practice:
No GEI target and no shortfall liability. A tyre plant cannot fail CCTS compliance, because it is not in the scheme.
Your inputs are covered even if you are not. Carbon black, synthetic rubber and steel cord come from petrochemical and iron and steel entities that do carry targets. Their compliance costs will reach you through raw material prices.
You can supply, not only buy. Non-obligated entities may register projects under the CCTS offset mechanism and earn Carbon Credit Certificates — relevant if you run captive renewables, waste heat recovery or biomass boilers.
CBAM does not cover tyres. Your steel cord is another matter
The EU Carbon Border Adjustment Mechanism entered its definitive phase on 1 January 2026, and importers must now buy and surrender CBAM certificates. Covered goods sit in six sectors: cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. Tyres are not on that list. Nor would credits help if they were: CBAM certificates cannot be substituted with voluntary offsets.
The exposure is indirect. Steel cord and bead wire are iron and steel goods, so the embedded emissions question lands on your bill of materials. The European Commission has floated extending CBAM to downstream goods, but that remains a proposal — track it, do not budget for it.
EUDR covers natural rubber, and credits will not fix it
This is the deadline that actually bites. Rubber is a regulated commodity under Regulation (EU) 2023/1115. Regulation (EU) 2025/2650, published in December 2025, moved the application date to 30 December 2026 for large and medium operators and for downstream operators and traders of every size, with 30 June 2027 for natural persons and micro-enterprises.
Europe matters more than the headline US number suggests. In FY26 Germany took 7% of India's tyre export value, Italy 5% and France 4% — around 16% between them, ahead of the United States at 15%, or ₹4,082 crore.
EUDR asks for things credits cannot supply: geolocation coordinates for the plots where the rubber was grown, a due diligence statement from the operator placing the product on the EU market, and evidence that the land was not deforested after 31 December 2020. Retiring credits against an untraceable rubber supply chain is not a compliance strategy — it is a greenwashing exposure.
Where carbon credits do earn their place
Three uses stand up to scrutiny in this sector:
Residual Scope 1 and 2. Mixing, curing and steam raising leave a hard core of emissions once renewable power contracts and heat recovery are exhausted. Credits cover the remainder while abatement capex is phased in.
Residual Scope 3, alongside supplier work. Raw material acquisition dominates the cradle-to-gate footprint of a tyre, and conventional furnace carbon black emits on the order of 3.5 tonnes of CO2e per tonne produced. Supplier engagement and recovered carbon black cut that figure; credits handle the rest.
Customer and rating requirements. OEM contracts, EcoVadis assessments and CDP disclosures increasingly ask what you are doing about unabated emissions. A documented, retired portfolio answers that.
Apollo Tyres shows the shape of a credible target. Its SBTi-validated targets: a 58.8% absolute reduction in Scope 1 and 2 emissions by FY2035 from an FY2025 base year, a 37.5% absolute reduction across four Scope 3 categories, and net zero across the value chain by FY2050. Note the ordering — deep reduction first, credits reserved for genuine residuals.
Sizing and sourcing the buy
Start with a verified inventory rather than a target tonnage. Once Scope 1 and 2 are measured, the credit question becomes arithmetic — annual residual tonnes multiplied by the price of the credit type your buyers will accept. Removals, avoidance credits and CCTS Carbon Credit Certificates sit at very different price points. Our breakdown of carbon credit prices in India sets out the current ranges.
Two procurement rules specific to tyre and rubber:
Match the credit to the emission profile. A buyer sourcing natural rubber finds nature-based and afforestation projects easier to explain than landfill gas — provided the project is independently verified.
Keep the offset ledger and the traceability ledger separate. Auditors and EU operators read them separately; blending the two weakens both.
Csquare helps Indian manufacturers with verified carbon credit sourcing, retirement documentation and afforestation programmes. If your tyre or rubber business is mapping its EUDR deadline and its credit strategy in the same quarter, talk to our team.
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