The EU Carbon Border Adjustment Mechanism (CBAM) will impose carbon duties on Indian exports of steel, cement, aluminium, fertilisers, electricity, and hydrogen starting January 2026. Indian exporters must report embedded emissions and may face significant duties.
What is CBAM?
CBAM is the EU carbon border tax designed to prevent carbon leakage — where companies relocate production to countries with lower carbon costs. It equalises the carbon price paid by EU producers (under the EU ETS) with that embedded in imports.
Which Indian Products Are Affected?
- Iron and Steel — India exports over USD 8 billion of steel products to the EU annually
- Cement — clinker and Portland cement
- Aluminium — unwrought aluminium, aluminium products
- Fertilisers — urea, ammonia, nitric acid
- Hydrogen
- Electricity
Timeline
- October 2023 – December 2025: Transitional period (reporting only, no duties)
- January 2026: CBAM duties begin (phased introduction)
- 2026-2034: EU ETS free allowances phase out; CBAM duties increase
- 2034: Full CBAM implementation
How CBAM Duties Are Calculated
CBAM duty = Embedded emissions x (EU ETS carbon price – any carbon price paid in India)
For Indian exporters, since India currently has no carbon tax on most sectors, the full EU ETS price applies. At current prices (~EUR 50-80/tonne CO2), this can add 10-25% to the cost of carbon-intensive exports.
What Indian Exporters Must Do Now
- Calculate embedded emissions for CBAM-covered products
- Set up emissions monitoring and reporting systems
- Register with EU CBAM authorities (via EU importers)
- Explore emission reduction to lower CBAM exposure
Use our CBAM Duty Calculator to estimate your exposure, or assess readiness with CBAM Compass.