India’s Steel Sector Under Pressure – CBAM Costs Threaten Export Competitiveness
CBAM Weekly – Issue 62
CBAM Update – Indian Government Warns of Risks
This week a clear signal came from New Delhi. Indian Steel Minister Sandeep Poundrik warned that the European Union’s Carbon Border Adjustment Mechanism poses a significant threat to Indian steel exports. Speaking at the FT Live Energy Transition Summit India, he emphasized that the industry must act now to mitigate the expected trade downturn. The EU’s CBAM introduces a carbon price on imported goods to create a level playing field with EU manufacturers already subject to the Emissions Trading System. Steel is one of the directly affected sectors.
Indian Steel Particularly Affected
India currently exports around 4.5 million tonnes of steel per year, with about two-thirds going to the European market. Most of this steel is produced via the emissions-intensive blast furnace-basic oxygen furnace route. From 2026, CBAM will impose a carbon price of about ₹5,200 (approx. €60) per tonne of CO₂, with annual increases as free EU allowances are gradually phased out. This pricing could significantly raise the cost of Indian steel exports and weaken their competitiveness. Poundrik noted that even new production capacity in India continues to be planned with this emissions-intensive technology, further exacerbating the problem.
Measures at the National Level
The Indian steel sector accounts for 12% of the country’s total greenhouse gas emissions, with an average emissions intensity of 2.55 tCO₂ per tonne of crude steel – well above the global average of 1.9 tCO₂. In response, the Indian government has introduced a Green Steel Taxonomy to accelerate decarbonization. Under this framework, steel is classified as “green steel” if less than 2.2 tCO₂ per tonne of final product is emitted during production. A star system rates the carbon footprint: 5 stars for under 1.6 tCO₂ per tonne, 3 stars for emissions just below the 2.2 tCO₂ threshold.
Implications for EU Importers
CBAM-reporting companies in the EU importing steel from India should closely monitor these developments. The risk of rising CBAM costs is increasing. In the long run, Indian producers may shift to lower-emission methods such as electric arc furnaces, but this requires significant investment and time. Importing companies should already begin reviewing their suppliers’ emissions data and factor CBAM costs into contract negotiations for 2026 and beyond.
Support for Strategic Planning
If you import steel or are affected by CBAM in another sector, we are happy to support your transition. Contact us directly at helge@kolum.earth. We will make your company CBAM-ready.