EU's Carbon Tax Impact on Indian Steel Exports

The European Union's carbon tax on metals, taking effect soon, threatens India's steel exports. India's Global Trade Research Initiative (GTRI) warns Indian exporters might need to reduce prices to cater to the EU's carbon border adjustment mechanism (CBAM). Compliance costs and emissions data verification present challenges.

The European Union is set to impose a carbon tax on certain metals, a move that could significantly affect India's steel exports, according to the Global Trade Research Initiative (GTRI). The tax, tied to carbon emissions during manufacturing, begins on Thursday and emphasizes different methods of production.

For steel, emissions vary widely by production route: Blast Furnace-Basic Oxygen Furnace (BF–BOF) emits the most, gas-based Direct Reduced Iron (DRI) less so, and scrap-based Electric Arc Furnace (EAF) the least. In aluminum, coal-generated electricity increases carbon burden and CBAM costs significantly.

The GTRI warns that while EU-based importers will purchase CBAM certificates, the cost will impact Indian exporters indirectly. With compliance costs set to rise sharply by 2026, small exporters may be pushed out of the EU market. Accurate emissions measurement will be crucial for competitiveness.