Weaving sustainability: Indian textiles & EU's CBAM challenge

If included, the focus will expand beyond carbon pricing to key sustainability areas such as circularity, adherence to labour standards, and compliance with environmental practices like the Zero Liquid Discharge (ZLD) policy. Beyond CBAM, the textile sector is already under the regulatory lens of the EU’s broader climate agenda—being a part of the European Green Deal and the 'Fit for 55' package, which seeks to cut carbon emissions in the EU by 55 per cent.

The EU’s continued interest in importing environmentally sound products has caught the attention of the world, with several manufacturing countries moving towards clean energy. India’s textile industry, in particular, uses a significant amount of water in apparel production, along with other processes such as dyeing. Fibre2Fashion explores the readiness of India’s apparel industry to meet environmental standards, diversify its export markets, and focus on EU countries.

India’s contribution to apparel exports compared to other countries

Exhibit 1: Top apparel exporting countries to the EU (CY 2022-24 in $ bn)

Source: TexPro

Moderate yet steady growth

India’s apparel exports to the EU rose from $4.70 billion in 2020 to $5.97 billion in 2024, marking a 27 per cent increase over five years. While this growth may not outpace that of some key competitors, it underscores India's resilience and steady advancement in an increasingly competitive and regulated market.

Stable market position

India consistently ranks behind leading exporters such as China, Bangladesh, and Turkiye, yet maintains a strong lead over emerging players like Vietnam and Cambodia. This positions India as a solid mid-tier exporter—surpassing smaller competitors while remaining within competitive proximity to top-tier exporters.

Lower volatility compared to peers

India’s export performance has demonstrated relative stability, with only a minor dip in 2023 followed by a rebound in 2024. In contrast, countries like China and Cambodia experienced more pronounced year-on-year fluctuations. This steadiness highlights India's diversified product range and its increasing adaptability to evolving global trade dynamics.

India’s renewable resources

Exhibit 2: Top apparel exporters to EU and their share of fossil fuels in total energy consumption (in %)

Source: World Bank

Fossil fuel dependency in textile-exporting countries: A comparative view

The data illustrates the share of fossil fuels in total energy consumption across major textile-exporting nations over eight years.

India demonstrates a relatively stable reliance on fossil fuels, with usage ranging from 76.42 per cent to 73.34 per cent. This marginal decline signals incremental progress toward energy diversification, albeit at a measured pace.

Bangladesh, by contrast, shows a steady and notable increase in fossil fuel dependence, reaching 83.13 per cent by the end of the period—highlighting a growing reliance on carbon-intensive energy sources.

Vietnam presents a fluctuating pattern, with fossil fuel usage oscillating between the high 70s and mid-80s. This volatility suggests ongoing challenges in transitioning to a more diversified or renewable energy mix.

Turkiye consistently records the highest fossil fuel share among the group, remaining above 81 per cent throughout the period. While there is a slight downward trend, the overall dependency remains firmly entrenched.

In contrast, Cambodia stands out with the lowest fossil fuel share. Although its reliance has increased from 41.64 per cent to 54.93 per cent, it continues to maintain a relatively greener energy profile compared to its peers.

Key insights

India is unique for maintaining a balanced and relatively stable fossil fuel share compared to peers like Bangladesh and Turkiye, which are more heavily reliant. India is yet to achieve clean energy levels comparable to smaller countries like Cambodia, but it fares better against its direct rivals, such as Bangladesh and Turkiye. This comes at a time when the EU looks to impose CBAM rules in free trade agreements. Despite textiles and apparel not being included under the CBAM rule, the sector is estimated to contribute 10 per cent of the global carbon footprint. However, current CBAM exposure levels show a different picture—

Exhibit 3: Relative CBAM exposure Index of select countries

Source: World Bank

Currently, only steel and iron, cement, aluminium, fertilisers, electricity, and hydrogen fall under the list of products to which CBAM will apply. The above graph depicts the current Relative CBAM Exposure Index, which is comparatively lower for Vietnam and Turkiye, given that India primarily exports steel and cement to the EU region. With the EU’s plan to expand the list of products covered by CBAM, there is an expected increase in exposure for both Turkiye and Vietnam.

India’s renewable power assessment

Exhibit 4: Renewable electricity output from total electricity output (in %)

Source: World Bank

Renewable electricity in textile production: A cross-country comparison (2015–2021)

Electricity is a critical component of energy consumption in textile and apparel production, especially in cotton processing, a major export segment for India. The data reveals stark contrasts in renewable electricity output as a share of total electricity generation among leading textile-exporting countries between 2015 and 2021.

India has demonstrated consistent progress, with renewable electricity increasing from 14.89 per cent in 2015 to 19.13 per cent in 2021. This upward trend reflects sustained investments in solar and wind energy, signalling a gradual shift toward cleaner production practices.

In Bangladesh, however, renewable electricity generation remains minimal, stagnating between 1.4 per cent and 1.8 per cent. This indicates a continued heavy reliance on fossil fuels and limited advancement in the adoption of clean energy technologies.

Vietnam shows a remarkable transformation, particularly after 2017. Its renewable electricity share surged to 41.17 per cent in 2021, driven primarily by rapid solar power deployment. This dramatic rise points to an ambitious and effective energy diversification strategy.

Turkiye maintains a relatively strong renewable share, fluctuating around an average of 35 per cent. The country peaked at 43.52 per cent in 2019, supported by robust hydroelectric and wind energy infrastructure, though year-on-year variability suggests some dependence on climatic or seasonal factors.

Cambodia consistently leads in renewable electricity usage among this group, with renewables contributing over 45 per cent of total electricity generation in most years. It peaked at 57.22 per cent in 2018, largely due to its high reliance on hydroelectric power, reinforcing its position as the greenest energy user among major textile exporters.

The way forward: Strengthening clean energy in India’s textile sector for EU market access

As India continues negotiations for the India-EU Free Trade Agreement (FTA), it must begin aligning its textile and apparel sector with global sustainability expectations, particularly in the area of clean energy integration. Although textiles and apparel are currently not under the purview of the EU’s CBAM, emerging regulatory trends suggest that environmental compliance will soon become a key determinant of market access.

India must take proactive steps to future-proof its textile exports by investing in renewable energy solutions, modernising production infrastructure, and adopting sustainable practices across the value chain. The ongoing trade tensions with the United States and the broader need to diversify its export destinations further reinforce the urgency of this transition.

Union Minister Piyush Goyal’s announcement regarding the establishment of a cleantech manufacturing platform, following the successful rollout of the production linked incentive (PLI) scheme, and the national target of achieving 500 GW of clean energy by 2030, provide a robust foundation for greening the sector.

Additionally, the Su.Re (Sustainable Resolution) initiative outlines a clear path forward for integrating eco-friendly materials and sustainable practices in garment manufacturing. Focused interventions in areas such as environmentally responsible cotton cultivation, adoption of water-efficient dyeing technologies, and broader use of renewable energy can significantly enhance the sector’s environmental credentials.

India has both the capacity and the opportunity to lead in clean textile manufacturing. Aligning with global standards now will not only strengthen our position in the EU market but also ensure long-term competitiveness and resilience in international trade.

Fibre2Fashion News Desk (NS)