US EditionBetween India and EU, a Carbon Gap and an FTA Bridge
The EU's carbon tax on Indian steel and aluminium exports requires plant-level emissions verification and may force price cuts of 15-22%, impacting market access, experts say.
- On January 1, 2026, the EU's Carbon Border Adjustment Mechanism moved into its payment phase, imposing a carbon cost on every shipment of Indian steel and aluminium to the 27-nation bloc.
- Industry data show steel and aluminium face the biggest exposure because their manufacturing is highly energy‑intensive, emissions vary by production route—BF‑BOF highest, DRI lower, EAF lowest—and coal‑fired power raises CBAM penalties.
- Mandated independent verification begins in 2026 for plant‑level emissions accounting, requiring quarterly fuel, electricity, and production tracking by EU‑recognised or ISO 14065‑compliant verifiers, or default emission values set 30 per cent higher.
- GTRI warns many exporters may need to cut prices 15–22 per cent as India's steel and aluminium exports to the EU already fell 24.4 per cent from $7.71 billion in FY24 to $5.82 billion in FY25.
- As a structural trade barrier, CBAM has become central to India‑EU trade negotiations, and GTRI recommends exporters adopt a 'CBAM shadow price' to evaluate embedded emissions, a key aspect of European climate‑trade policy.
10 Articles
10 Articles
Between India and EU, a carbon gap and an FTA bridge
The new tax could wipe out 16–22 per cent of the actual prices received, force contract renegotiations, and weaken the presence of Indian products in the EU — a market that absorbs about 22 per cent of India’s steel and aluminium exports
The Carbon Border Adjustment Mechanism (CBM) enters into force on 1 January 2026. The scheme, known as the "European carbon tax", aims to protect the European industry from foreign competition, but is criticized by overseas industry, in particular.
EU Carbon Tax Kicks In: Why India’s Steel And Aluminium Exports Face A Major Shock
According to GTRI, the new levy is expected to force many Indian exporters to slash prices sharply to retain access to the EU market, even though the tax will technically be paid by European importers
EU implements carbon border tax, poses challenge for Indian exports - India Seatrade News
The European Union on January 1 began enforcing the world’s first carbon tax under its Carbon Border Adjustment Mechanism (CBAM), sparking concerns in developing countries, including India. The levy targets carbon-intensive imports from sectors such as steel, aluminium, cement, chemicals, and fertilisers, with similar measures expected in the UK this year. India, a major exporter of steel and aluminium to the EU, faces significant impact. Export…
Indian steel firms face 22% price cut as EU carbon tax comes into force - Cargo Insights
Indian steel firms face a 22% price drop as the EU’s new carbon tax takes effect on 1 January, hitting export margins. working process at steel factory Indian exporters of steel and aluminium are bracing for a period of intense financial pressure within the European market. According to a recent analysis by the Global Trade Research Initiative (GTRI), domestic firms may be forced to lower their export prices by 15 percent to 22 percent starting …
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