EU Carbon Border Tax: Impact on India’s Metal Exports

EU Carbon Border Adjustment Mechanism (CBAM)

Context

  • From January 1, 2026, CBAM enters the payment phase
  • EU importers must pay for embedded carbon emissions in select imports

What is CBAM?

  • EU’s carbon border tax on carbon-intensive imports
  • Objective
    • Prevent carbon leakage
    • Ensure level playing field with EU producers under EU ETS

How it works

  • Importers buy CBAM certificates
  • One certificate equals one tonne of CO₂

Covered Sectors

  • Iron & steel
  • Aluminium
  • Cement
  • Fertilisers
  • Electricity
  • Hydrogen

India’s Concerns

  • Violates CBDR principle
  • Acts as non-tariff barrier / green protectionism
  • Indian steel and aluminium may face 20–35% price disadvantage in EU market

India’s Response

  • Carbon Credit Trading Scheme (CCTS): domestic carbon pricing
  • Carbon price paid in India can be deducted from CBAM liability
  • Prevents double taxation
EU Carbon Border Tax
EU Carbon Border Tax
EU Carbon Border Tax
EU Carbon Border Tax
EU Carbon Border Tax
EU Carbon Border Tax
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