EU's CBAM Expansion: A New Challenge for Indian Exporters

The European Union's planned expansion of its Carbon Border Adjustment Mechanism (CBAM) could significantly raise carbon tax costs for Indian exports. The move, proposed by the European Parliament, aims to include a wider range of goods, potentially challenging India's position in the EU market.

The European Union is preparing to broaden its Carbon Border Adjustment Mechanism (CBAM), a change that could substantially escalate carbon tax burdens on Indian exports to Europe, as warned by think tank GTRI.

The European Parliament's Committee on the Environment, Climate and Food Safety (ENVI) has drafted a report proposing that from January 1, 2028, CBAM will cover about 180 more steel and aluminium-based products. This expansion includes tighter carbon accounting for scrap-based production and consideration of indirect emissions from electricity use across several sectors.

The CBAM, which acts as the EU's carbon tax on non-European imports, could extend to numerous new products, impacting exporters of engineering goods and aluminium manufactures. The proposal underscores Europe’s commitment to reducing carbon footprints while presenting competitive challenges for countries like India.