New Delhi: India’s steel and aluminium sectors are confronting an unprecedented challenge as the European Union’s Carbon Border Adjustment Mechanism (CBAM) moves from its transitional phase towards full implementation in January 2026, industry leaders warned at a high-level webinar, Navigating CBAM: The Way Forward, organised by FICCI.
Senior executives from major steel producers cautioned that Indian exporters face a potential 20-35 percent tax burden on shipments to Europe, with steel exports particularly vulnerable to duties ranging from USD 102-119 per tonne over the next decade.
Vinod Gupta, Senior Member of FICCI's Steel Committee and Executive Director (Commercial) at SAIL, highlighted the sector’s predicament, "CBAM could add a 20 to 35 percent tax burden on Indian steel exports to the EU. India’s steel emission intensity is currently 2.5 tonnes of CO2 equivalent per tonne of crude steel compared to the global average of 1.91 tonnes."
The webinar brought together government officials, industry leaders, and international experts to address the mechanism that targets carbon-intensive sectors, including steel, aluminium, cement, fertilisers, electricity, and hydrogen.
Dr James Nedumpara, Professor and Head of the Centre for Trade and Investment Law, raised concerns about CBAM's compatibility with international trade principles. "In international trade law circles, many people argue that it is a complete violation of international trade agreements. The assumption is that no country can actually differentiate products based upon the production process unless the production process has some influence on the product characteristics," he observed.
Sanjay Singh, Director of Strategy & External Relations at JSPL and former Steel Secretary, emphasised the technological constraints facing the industry, "Steel is a hard-to-abate sector. Technology towards full decarbonisation does not exist, or if it exists, it is not in an implementable form or economically viable form."
The steel sector exported 5-6 million tonnes globally in recent years, with 25 percent destined for European markets. However, Singh noted that exports have declined from 5-6 percent of total production in previous years to 3-4 percent in 2024.
Arijit Sengupta, Director of the Bureau of Energy Efficiency (BEE), outlined the government's Carbon Credit Trading Scheme (CCTS) as a key support mechanism. "The Government of India has come up with tools to support the decarbonisation journey of Indian industry. One is the BEE's reporting of savings, and the other is the carbon credit trading scheme," he said.
Despite the challenges, major steel producers are accelerating decarbonisation investments. Singh highlighted JSPL's initiatives, "There is a very big thrust on renewable energy. Around 3 gigawatts of capacity is being set up. The capacity for production of green hydrogen is being set up, and we are pioneering coal gasification."
However, the MSME sector faces particular challenges in implementing CBAM's rigorous monitoring, reporting, and verification requirements due to limited resources and technical expertise.
Industry leaders called for recognition of developing countries' constraints. Gupta argued, "While not denying the necessity for stopping global warming, it must be recognised that a major proportion of emissions were historically created by nations presently classified as developed. In its present form, CBAM is likely to turn into an unfair trade regulation tilted against developing nations."
With the UK preparing to introduce its own CBAM in 2027 and similar mechanisms under consideration elsewhere, Nedumpara warned that "CBAM or carbon pricing mechanisms or carbon tax mechanisms are actually becoming the norm."
Steel currently contributes around 12 percent of India's total CO2 emissions, making the sector's response to CBAM critical to India's path towards its 2070 net-zero goal.
