Introduction: The Invisible Border Tax

Over the past five years, India has exported over ₹65,000 crore worth of iron and steel products to the European Union. This isn’t just a trade corridor—it’s a carbon corridor. Now, the European Union’s Carbon Border Adjustment Mechanism (CBAM) threatens to flip the script.

What was once a margin-based game is now a mandate-based market. The CBAM essentially transforms the EU’s internal carbon pricing (under ETS) into an external tariff on high-carbon imports, starting 2026. And Indian steelmakers are standing directly in the crosshairs.

The Growth Boom: Steel Exports to EU

Over FY2018–FY2023, India’s iron and steel exports to the EU surged, peaking at $8 billion (₹60,000 crore+) in FY22. This reflected both global recovery and strong demand for semi-finished and long steel products.

Figure 1: India’s Steel Exports to EU (2018–2023)

The Carbon Cost Curve: ₹9,000 Cr Liability by 2034

What’s lurking beneath these export numbers is the carbon cost. Under CBAM, each tonne of steel exported to the EU will attract a carbon tariff aligned with EU ETS prices. At current intensity levels, Indian BF-BOF steel producers could face a CBAM surcharge of $4.36/tonne, rising as EU phases out free allowances.

CBAM Exposure = A New Trade Barrier

• EU’s free allowance phase-out begins in 2026 and ends by 2034
• For Indian steel exporters, this means:
  • ₹190 Cr liability in 2026
  • ₹9,048 Cr liability in 2034 (zero allowances)
• All without a single change in customs duty
• Table: Estimated CBAM Liability (INR Cr):

Year	Free Allowance (%)	CBAM Liability
2026	97.5%	₹190 Cr
2028	90.0%	₹794 Cr
2030	51.5%	₹4,019 Cr
2034	0.0%	₹9,048 Cr

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From Legacy to Leap: Why Indian Steel Must Transition

India’s steel sector is dominated by the BF-BOF route—highly carbon-intensive. The future belongs to DRI–EAF using green hydrogen, where emissions fall below 0.5 tCO₂/tonne. This isn’t just climate compliance—it’s cost advantage.

🔍 India’s Comparative Emission Profile:

• India (BF-BOF): ~2.5 tCO₂/ton
• EU (EAF): ~1.3 tCO₂/ton
• Green DRI-EAF (Future): ~0.3–0.5 tCO₂/ton

Exporters who don’t switch face automatic margin erosion. In a green steel world, carbon is currency.

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A National Green Steel Mission?

If India can build a ₹1.4 lakh crore PLI scheme for electronics and semiconductors, why not a national Green Steel Export Competitiveness Mission?

This must include:

• Mandatory MRV systems for Scope 1+2 emissions
• Green hydrogen procurement corridors
• Carbon price pass-through models in export contracts
• A carbon registry linked to India’s upcoming Carbon Credit Trading Scheme (CCTS)

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Final Word: Go Green or Go Home

CBAM is not a trade war—it’s a carbon adjustment. For India’s steelmakers, this is a reset moment. The EU isn’t asking for less steel—it’s asking for cleaner steel. With over ₹65,000 Cr already at stake, this is not a climate story—it’s an economic survival plan.

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