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EU’s CBAM tax may pose significant threat to Indian steel, aluminium exporters: GTRI
Dec-31-2025

The Global Trade Research Initiative (GTRI) has said that the European Union's (EU) Carbon Border Adjustment Mechanism (CBAM) tax, starting from January 1, 2026, is expected to pose a significant threat to Indian steel and aluminium exporters. The EU is implementing CBAM tax on goods that emit carbon during the manufacturing process. 

GTRI said in steel, emissions are highest for Blast Furnace -- Basic Oxygen Furnace (BF-BOF) routes, lower for gas-based Direct Reduced Iron (DRI), and lowest for scrap-based Electric Arc Furnace (EAF) routes. Similarly, in aluminium, electricity source and power intensity are critical. Power generated from coal significantly raises the carbon burden and, therefore, the CBAM cost.  It said that many Indian exporters may have to cut prices by 15-22 per cent so EU importers can use that margin to pay the CBAM tax. Indian exporters will not pay the tax directly as the EU-based importers -- registered as authorised CBAM declarants --have to buy CBAM certificates linked to the embedded emissions in imported goods. But this cost will be pushed back to Indian exporters.

India's steel and aluminum exports to the EU significantly dropped by 24.4% to $5.82 billion in FY25 as compared to $7.71 billion in FY24. The carbon tax is an important issue in the ongoing India-EU Free Trade Agreement (FTA) negotiations.  


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