EU’s carbon tax will be implemented from January 1, fear of loss to India’s steel and aluminum exporters

New Delhi. The European Union (EU)’s carbon tax on certain metals (CBAM) is going to be implemented from January 1, which may deal a blow to India’s steel and aluminum exports. Economic research institute GTRI gave this information on Wednesday. The group of 27 countries of the European Union is imposing this tax on those goods which produce carbon emissions during their manufacturing.

In the steel sector, emissions are highest in the Blast Furnace-Basic Oxygen Furnace (BF-BOF) route, while it is lowest in gas-based DRI and lowest in scrap-based Electric Arc Furnace (EAF). Similarly, power source and energy consumption play an important role in aluminium. Electricity generated from coal increases the carbon burden, which also leads to higher CBAM costs.

According to the Global Trade Research Initiative (GTRI), many Indian exporters may have to undercut prices by 15 to 22 per cent so that EU importers can pay the CBAM tax from the same profit (margin). Indian exporters will not have to pay the tax directly as EU-based importers (who are registered as authorized CBAM declarants) will have to purchase CBAM certificates relating to the emissions contained in the imported goods. The burden will ultimately fall on Indian exporters.

Ajay Srivastava, founder of economic research institute GTRI, said, “From January 1, 2026, every consignment of Indian steel and aluminum entering the EU will have a carbon cost attached as CBAM will move from the ‘reporting’ phase to the payment phase.”

He said complex data and verification processes would increase compliance costs, which could drive many small exporters out of the EU market. Srivastava said that accurate estimation of emissions has now become the basis of competition. Independent verification of emissions data will be mandatory from 2026 and only EU-accredited or ISO 14065-compliant verifiers will be accepted.

‘ISO 14065’ specifies principles and requirements for bodies performing verification and certification of environmental information statements. For low-emission producers, however, CBAM can also become a competitive advantage.

According to GTRI, India’s steel and aluminum exports to the EU are expected to decline from $7.71 billion in fiscal year 2023-24 to $5.82 billion in 2025, a decline of 24.4 percent. Carbon tax also remains an important issue in the negotiations on the proposed trade agreement between India and the EU.