Impact of the EU’s Carbon Border Adjustment Mechanism (CBAM) on Indian Steelmakers
The introduction of the EU's CBAM has significant implications for Indian steelmakers, marking a shift from its transitional phase to definitive implementation, affecting exports of steel, aluminium, and cement to Europe.
Export Statistics and Trends
- India's iron and steel exports to the EU doubled post-Covid, from USD 2.7 billion in FY21 to nearly USD 6 billion in FY22.
- Once CBAM's transitional reporting phase began, exports sharply declined, with a 30% reduction by FY25 compared to FY24.
- By FY26, with the definitive phase of CBAM, iron and steel shipments crashed by over 51%.
EU Emissions Trading System (ETS) and Pricing
- The December 2025 EU ETS auction was cleared at €87.37 per tonne CO2, significantly higher than historic floors of €20-30.
- Importers prefer Indian steel for its ore-labour cost advantages in decarbonised tonnes, despite CBAM costs.
Challenges and Opportunities
- CBAM necessitates aligning India’s MRV systems with ETS equivalents to remain competitive.
- The National Green Hydrogen Mission aims for a 5 MMTpa target by 2030 to decarbonise the steel sector.
- As of mid-2025, only 3 GW of electrolyser capacity was awarded, lagging behind the 60-100 GW needed.
Green Hydrogen Projects and Trade Barriers
- Projects like the Sembcorp’s Tuticorin green ammonia hub face delays due to technology IP sharing issues.
- European Hydrogen Bank rules limit the use of Chinese electrolysers, affecting project progress.
- India imports most electrolysers from China, followed by Singapore, the UK, and Germany.
Recommendations for India
- India should liberalise imports of intermediate goods and essential inputs to boost green hydrogen production.
- The average applied tariff in India is 11.4%, double the global average, suggesting room for policy adjustment.
Conclusion
CBAM presents both a challenge and an opportunity for India. Embracing the green metal transition could establish India as a green superpower, capable of producing the world's cleanest and most competitive steel.
