India’s steel industry faces significant challenges as the European Union’s Carbon Border Adjustment Mechanism (CBAM) is set to come into effect, potentially impacting the competitiveness of Indian exports. According to government officials, nearly two-thirds of India’s steel exports are directed to the European market, making the sector particularly vulnerable to the proposed carbon levy.
The CBAM aims to impose charges on imports of carbon-intensive products, including steel, in order to prevent “carbon leakage” from industries shifting production to countries with looser environmental standards. For Indian producers, many of whom rely on coal-based blast furnaces, the costs of compliance could be substantial. Exporters may be required to disclose detailed emissions data for their products, and higher carbon footprints are expected to attract heavier levies.
Steelmakers in India have expressed concerns that the mechanism could erode margins and limit their ability to compete with European producers who operate under stricter, but domestically subsidised, environmental rules. Industry experts believe the measure may accelerate the need for Indian companies to invest in green technologies such as hydrogen-based reduction, carbon capture, and more energy-efficient furnaces.
While the European tax is seen as a serious threat, the impact of recently announced United States tariffs on steel is expected to be far less pronounced. India exports only a small fraction of its steel output to the U.S., and officials have indicated that these tariffs will not significantly alter the trade balance.
The twin developments highlight the shifting dynamics of global trade in the age of climate policy. For India’s steelmakers, the challenge lies in balancing export growth with environmental responsibility. Policymakers and industry leaders alike are now under pressure to accelerate decarbonisation efforts to safeguard market access and ensure long-term sustainability.
