With carbon tariffs set to begin in 2026, sector leaders warn of declining competitiveness and call for global equity and domestic decarbonisation support
New Delhi, July 29, 2025: India’s steel and aluminium industries are bracing for steep cost implications as the European Union’s Carbon Border Adjustment Mechanism (CBAM) moves into its final phase, with full implementation slated for January 2026. Industry leaders, speaking at FICCI’s high-level webinar “Navigating CBAM: The Way Forward,” warned of a looming export tax burden ranging from 20% to 35%, significantly impacting global competitiveness.
Vinod Gupta, Senior Member of FICCI’s Steel Committee and Executive Director (Commercial) at SAIL, noted that Indian steel exports could face duties of up to $119 per tonne, driven by India’s higher emissions intensity of 2.5 tonnes of CO₂ per tonne of crude steel—well above the global average of 1.91.
CBAM applies to carbon-intensive sectors like steel, aluminium, cement, fertilisers, hydrogen, and electricity. Experts also questioned its legal foundation under global trade laws. Dr. James Nedumpara from the Centre for Trade and Investment Law noted the measure may contravene WTO principles, stating, “You cannot differentiate products based on production processes unless they affect the end product.”
Former Steel Secretary Sanjay Singh, now with JSPL, stressed that steel is a “hard-to-abate” sector with limited viable decarbonisation options at present. He also highlighted JSPL’s efforts in renewable energy and green hydrogen, while underlining the difficulties faced by MSMEs in complying with CBAM’s complex reporting standards.
Arijit Sengupta from the Bureau of Energy Efficiency pointed to the government’s Carbon Credit Trading Scheme (CCTS) as a key step in aiding industrial decarbonisation.
Industry leaders called for fairer treatment of developing economies. Gupta argued that CBAM disproportionately penalises countries with less historical emissions, saying, “In its current form, CBAM risks becoming an unfair trade tool tilted against the developing world.”
As the UK plans to launch its own CBAM in 2027, and other regions explore similar mechanisms, Indian industry faces growing pressure to accelerate its climate transition and protect export viability—especially as the steel sector alone accounts for 12% of India’s total CO₂ emissions.
About FICCI:
Established in 1927, the Federation of Indian Chambers of Commerce and Industry (FICCI) is India’s largest and oldest apex business organisation, representing diverse industries and advocating for policy reforms that promote sustainable and inclusive growth.
