CBAM Impact: Decarbonisation Challenges for India's Steel Sector

The EU's Carbon Border Adjustment Mechanism (CBAM) is posing challenges for India's small and medium-sized steel enterprises due to financial and technological constraints. A study by IIM-Lucknow and IMT-Ghaziabad researchers found that while large steel plants may adapt, smaller firms could struggle, highlighting the need for equitable solutions.

The European Union's Carbon Border Adjustment Mechanism (CBAM) is creating hurdles for small and medium Indian steel enterprises, a recent study indicates. Despite policy frameworks outlined by researchers at IIM-Lucknow and IMT-Ghaziabad, there are significant financial and technological barriers preventing these enterprises from keeping pace with larger steel producers.

Published in the International Environmental Agreements journal, the findings suggest that while integrated steel plants might adjust production for the EU market, smaller firms face considerable challenges, leading to a two-speed decarbonisation process. Researchers stress that without adequate support, smaller enterprises may remain vulnerable to competitive pressures.

The CBAM, effective since October 2023, aims to levy charges on imports of emission-intensive products like steel. While its intent is to curb carbon leakage and drive global decarbonisation, the study urges policymakers to implement complementary measures like technology transfer to foster a fair and effective global decarbonisation strategy.