The European Union’s (EU) carbon tax on steel will come into force as of Thursday, January 1, 2026 and expected to hurt Indian exports with exporters may be forced to cut prices 15-22 percent, think-tank Global Trade Research Initiative (GTRI) said in a report on Wednesday, December 31.
It said that exporters’ cut in price would be used by EU importers to pay the carbon border adjustment mechanism (CBAM) tax.
Indian exporters will not pay the tax directly as the EU-based importers -- registered as authorized CBAM declarants -- have to buy CBAM certificates linked to the embedded emissions in imported goods.
But this cost will be pushed back to Indian exporters, GTRI said.
"From January 1, 2026, every shipment of Indian steel entering the EU will carry a carbon cost as the Carbon Border Adjustment Mechanism (CBAM) moves from reporting to payment phase," it said.
“The CBAM's complex data and verification requirements will sharply raise compliance costs, pushing many smaller exporters out of the EU market altogether,” it added.
Accurate emissions measurement becomes the foundation of competitiveness in the EU market.
"CBAM is not a corporate sustainability exercise. It is a plant-level emissions accounting regime. Emissions must be calculated for each installation, covering direct fuel combustion and electricity consumption," GTRI said.
Manufacturing exporters have to track fuel use, electricity consumption, production volumes, and emission factors on a quarterly basis.
"Records must be auditable and aligned with EU methodologies. Without this discipline, exporters face default emission values set by the EU- intentionally conservative and often 30-80 percent higher than actual emissions," GTRI said.
From 2026, he said, independent verification of emissions data becomes mandatory. Only EU-recognized or ISO 14065- compliant verifiers will be accepted.
