CBAM: How the EU Carbon Border Tax Reshapes India-EU Steel and Aluminium Trade

CBAM is designed to prevent carbon leakage — the risk that EU manufacturers facing a domestic carbon price are undercut by importers from countries without equivalent carbon pricing. EU importers of covered goods must purchase CBAM certificates equal to the carbon price that would have been paid under the EU ETS. At approximately EUR 65-80 per tonne of CO2, this is a significant cost for carbon-intensive Indian steel and aluminium producers.

India-specific impact: India steel averages approximately 2.5-3.0 tonnes of CO2 per tonne of crude steel versus the EU average of 1.8 tonnes. Indian steel exporters to EU face a CBAM premium of approximately EUR 45-95 per tonne — a significant competitive disadvantage for commodity steel grades.

The opportunity: Indian steel producers investing in electric arc furnaces, green hydrogen-based DRI, and renewable energy can reduce their carbon intensity toward EU levels, dramatically reducing CBAM liability and potentially achieving a competitive advantage. Tata Steel, JSW, and SAIL have announced decarbonisation roadmaps aligned with this opportunity.

What exporters must do now: Calculate your embedded carbon intensity per tonne using EU-approved methodology. Register your EU importer in the EU CBAM registry. Submit quarterly CBAM transitional reports. Invest in Scope 1 and 2 emission reduction — every tonne of CO2 eliminated saves EUR 65+ in CBAM liability. Explore green steel certification (ResponsibleSteel) to signal low-carbon credentials to EU buyers.