The European Union’s Carbon Border Adjustment Mechanism (CBAM) has moved beyond its transition period, now requiring EU importers to account for embedded emissions in goods like steel. This has already led to some smaller European customers discontinuing orders from Indian manufacturers such as Chandan Steel Limited due to increased costs and administrative burdens.
Indian exporters face challenges in gathering and verifying emissions data from suppliers, which is crucial for compliance. Small and medium-sized enterprises (MSMEs) find it particularly difficult to obtain the necessary certifications and data, with estimated compliance costs ranging from Rs 5-10 million. The EU’s CBAM is intended to prevent carbon leakage and ensure imported goods face comparable carbon prices to domestic production.
India’s steel and aluminium exports to the EU are particularly exposed. While the definitive phase of CBAM started January 1, 2026, the purchase of emissions certificates for 2026 imports begins in February 2027. Research suggests that Indian steel and aluminium exporters could face price reduction pressures and potential declines in export volumes once the payment phase commences.
Source: Down To Earth