Indian iron and steel exporters are facing a hefty new challenge: Europe’s Carbon Border Adjustment Mechanism (CBAM). A recent analysis by the European non-profit think-tank Sandberg reveals that Indian firms could be hit with approximately €301 million (around ₹3,000 crore) in CBAM fees. This figure is the highest projected levy for any country exporting similar products to the European Union.
So, what exactly is CBAM? It’s a carbon tax that EU importers must pay when purchasing goods from nations whose manufacturing processes generate more carbon dioxide emissions per tonne than comparable products produced within the EU. Essentially, it’s designed to level the playing field and encourage cleaner production globally.
Sandberg’s newly launched online calculator, made public this Thursday, further highlighted the scale of these charges. Following India, Russia is estimated to face the next highest CBAM charges at €240 million, with Ukraine at €198 million and China at €194 million.
Beyond iron and steel, India’s total CBAM liability, encompassing exports of aluminum and cement, is projected to reach about €330 million. This amounts to roughly 1.05% of the total value of all goods India trades with the EU. However, the study also offers a silver lining: Indian exporters could boost their revenues by an estimated €510 million if they embrace cleaner production technologies. This strategic shift could lead to a net cost reduction of roughly €180 million, turning a potential liability into an opportunity.
India has voiced strong opposition to the CBAM, with various industry bodies labeling it a “non-tariff barrier.” In July, Commerce Minister Piyush Goyal even indicated that India might “retaliate with taxes of its own” if the EU proceeds with its implementation.
Despite the substantial projected fees, CBAM-exposed exports to the EU only constitute a small fraction—0.2%—of India’s overall GDP. However, iron and steel products alone account for nearly 90% of these affected exports. The carbon tax has emerged as a significant hurdle in the ongoing Free Trade Agreement (FTA) negotiations between India and the EU, with both parties aiming to finalize a deal by the end of this calendar year.
New Delhi maintains that developed nations, given their historical contribution to global emissions, should bear a larger share of the climate responsibility. To counter CBAM’s impact, India is actively developing a domestic carbon trading system and plans to triple its renewable energy capacity by 2030.
As the world’s third-largest carbon emitter, India’s power sector, heavily reliant on coal, remains the primary source of its emissions. CBAM is currently in a transitional phase but is slated for full implementation in January 2026. Initially, it will apply to imports of iron and steel, aluminum, cement, fertilizers, electricity, and hydrogen, with potential expansion to other sectors in the future. The mechanism does allow exporters to deduct any carbon costs already paid domestically, helping to prevent double taxation.
Intriguingly, independent experts view CBAM as a potential catalyst for India. Joydeep Ghosh and Rajat Verma from the Centre for Social and Economic Progress suggested in an August policy paper that “If India implements its own carbon tax and keeps the revenue domestically, it can largely neutralise these downsides.” They further noted that such measures could help India retain substantial funds—around 1% of its GDP by 2030—for reinvestment into green initiatives, ensuring economic growth remains minimally affected.