The European Union’s Carbon Border Adjustment Mechanism (CBAM) will impact Indian exports, particularly in steel, aluminium and other high-emission industries, Thomas Kerr, lead climate change specialist at the World Bank, said on Thursday, February 27.
“The EU’s CBAM will impact Indian exports, particularly in steel, aluminium and other high-emission industries. This calls for urgent action in domestic carbon markets,” Kerr said.
Indian carbon market does not operate in isolation, as global carbon pricing policies will influence India's industries. Businesses must prepare for these shifts, he said.
The EU Carbon Border Adjustment Mechanism (CBAM) will enter into force on January 1, 2026, after a transition period starting in October 2023.
The CBAM covers iron and steel, aluminium, cement, fertilizer and electricity, and requires the purchase of CBAM certificates that report direct and indirect carbon emissions of these goods. The CBAM could have a significant impact on the competitiveness of developing countries that mainly export these goods to the EU.
The Relative CBAM Exposure Index has been designed by the World Bank to identify countries with a high exposure to the EU CBAM, using carbon emissions intensity and exports of CBAM products to the EU. Assuming the carbon price ($100 per metric ton), the index measures the additional cost of CBAM certificates for exporters compared to the average EU producer, adjusted by the proportion of exports to the EU market.