Will India’s steel exports be impacted due to CBAM?

Sandbag has developed an interactive tool that models the likely real-world effects of the Carbon Border Adjustment Mechanism (CBAM) on the EU’s trading partners and specific industries that export to the EU.

Using this granular sector-level analysis, Sandbag’s report The EU CBAM’s real impact on India found that under various scenarios, the actual impact on India’s steel exports to the EU could be far smaller than feared, even negligible.

Total CBAM costs are projected to drop from €762 million to approximately €79 million, given rising EU market prices. Already-existing low-emission Indian steel production could benefit from CBAM.

Under an "ambitious" long-term scenario that incorporates the deployment of new low-emission capacity, the net impact of the CBAM could shift from a total cost burden to a net profit of €44 million as CBAM fees would be reduced while Indian exporters would capture more of the benefit from higher EU steel prices.

 “We identified Indian steel plants with emission intensity levels low enough to gain from the CBAM. Other criteria such as geographical location, readiness for CBAM reporting and new anti-circumvention rules still leave significant low-emission manufacturing capacity such as ArcelorMittal’s Hazira plant for low-carbon steel exports to the EU; such existing infrastructure can be leveraged to maintain competitiveness under the CBAM regime,” said the report.

CBAM, implemented this year, is the EU’s mechanism to ensure its industries that pay a price for their carbon emissions under the EU’s Emissions Trading System (ETS) are not competing with imports that have not paid an equivalent price for their production emissions.

India has termed the deal unfair and ineffective. It has called CBAM discriminatory, protectionist, and in violation of WTO principles and the 2015 Paris Agreement.

However, February’s groundbreaking Free Trade Agreement between the EU and India included extensive climate-related commitments, including €500m over two years to support India’s transition and a Climate Action Platform to drive collaboration and dialogue over issues including CBAM and carbon pricing coordination, such as over India’s planned Carbon Credit Trading Scheme.