EU's Carbon Border Adjustment: A Double-Edged Sword for India's Steel Industry

The EU's Carbon Border Adjustment Mechanism presents challenges for India's small and medium steel producers due to various constraints, while larger plants may adapt. The mechanism's impact on equity and feasibility is debated, suggesting policy adaptations to support fair decarbonisation pathways and international negotiations.

The European Union's Carbon Border Adjustment Mechanism (CBAM) poses significant challenges for India's small and medium-sized steel enterprises, as revealed by an Indian Institute of Management-Lucknow study. Financial, technological, and capacity constraints are key impediments these firms face under the CBAM framework.

Large integrated steel plants, on the other hand, may adapt to supply lower-carbon steel to the EU market. Implemented in October 2023, the CBAM aims to apply charges based on the carbon content of imports, promoting decarbonisation and preventing carbon leakage.

However, the study highlights potential risks, such as inequality and increased costs for exporters, urging policymakers to consider fair and collaborative strategies. These findings are especially vital in ongoing India-EU negotiations and future global climate strategies.