The EU carbon border charge is live: what it means for Indian steel and aluminium

The EU's Carbon Border Adjustment Mechanism (CBAM) moved from a reporting only phase into its definitive phase on 1 January 2026. EU importers of covered goods now carry a financial cost linked to the carbon emitted in making them.

How it works

• CBAM covers iron and steel, aluminium, cement, fertilisers, electricity and hydrogen.
• EU importers must be authorised CBAM declarants and buy CBAM certificates, priced in line with the EU Emissions Trading System, to cover the embedded emissions of what they import.
• Certificates for goods imported in 2026 are bought and surrendered from 2027.
• Importers bringing in less than 50 tonnes of CBAM goods a year are exempt.

Why Indian producers are exposed

Coal based technologies account for more than 80% of India's steel output. Research published in 2026 puts the sector's average emissions at about 2.55 tonnes of CO₂ per tonne of steel, against a global average of about 1.85 tonnes. Much of India's aluminium is also made with coal fired power.

The effect is already showing. The Global Trade Research Initiative estimates India's steel and aluminium exports to the EU fell 24.4% in 2024–25, before payments began. A study in Nature Climate Change found that high emission Indian firms cut exports to the EU during the reporting phase, while low emission firms kept theirs steady.

Default values cost more

If an importer cannot get verified emissions data from the producer, it must use the EU's default values, which are set high. Verified plant level data usually means a lower charge.

What EU buyers should do

• Ask Indian suppliers for verified emissions data for the specific plant and product.
• Compare suppliers on carbon intensity as well as price. A cheaper tonne can cost more once CBAM is added.
• Note that the EU–India trade agreement does not remove CBAM.

Sources

• Nature Climate Change, Early signs that CBAM is reshaping EU–India steel trade
• Down To Earth, EU carbon rules enter implementation phase
• GTsetu, CBAM 2026: what changes for Indian exporters
• European Commission, Carbon Border Adjustment Mechanism

This article is general information, not legal, tax or customs advice. Trade rules change often, so confirm the position for your product with your customs broker before you ship.