The imposition of the Carbon Border Adjustment Mechanism (CBAM) by the European Union (EU) will increase the costs of Indian steel manufacturers by €551 million by 2034, potentially reducing their global competitiveness, a report by business advisory firm Grant Thornton Bharat stated on Tuesday, July 15.
The CBAM entered its reporting phase in the third quarter of 2024 and is set to impose financial obligations starting January 2026. It functions as an import duty on products manufactured in countries with less stringent climate regulations than those of the EU.
Flat-rolled iron and steel products, which account for nearly 80 percent of India’s steel exports to the EU, are expected to be among the most affected, according to the report.
The report highlighted a gap between emission levels in Indian and EU steel production, suggesting a potential financial burden for Indian exporters unless emissions are brought in line with EU standards.
“CBAM poses a significant challenge for auto component exporters, especially micro, small, and medium enterprises (MSMEs) that rely on fossil fuel-based energy. To remain competitive, India must accelerate the transition to cleaner energy sources and adopt sustainable manufacturing practices,” Grant Thornton Bharat stated in the report.