CBAM and the Emerging Carbon Price Reality for Indian Exporters
As the world takes increasingly firm steps toward decarbonization, climate regulations are starting to reshape global trade dynamics. One such game-changing policy is the Carbon Border Adjustment Mechanism (CBAM) introduced by the European Union. While aimed at supporting the EU’s climate neutrality goals, it’s sending ripples across global supply chains — especially for countries like India, which are major exporters of industrial products like steel, aluminium, and cement.
What is CBAM?
CBAM acts like a climate checkpoint for certain goods entering the EU. If you're exporting cement, steel, aluminium, fertilizers, hydrogen, or electricity to the EU, the CBAM ensures that your carbon footprint is transparent and financially accounted for.
Just as passengers on an international flight must go through security and customs, products entering the EU must now go through a carbon customs where their embedded greenhouse gas (GHG) emissions are declared—and soon, priced.
CBAM is essentially a carbon pricing tool for imported goods. It ensures that imported products into the EU bear the same carbon cost as goods produced within the EU under its Emissions Trading System (EU ETS). This prevents a phenomenon known as carbon leakage, where production shifts to countries with laxer climate policies.
CBAM covers direct greenhouse gas (GHG) emissions from the production of:
Cement
Iron & steel
Aluminium
Fertilizers
Electricity
Hydrogen
And will gradually expand to include indirect emissions and possibly more sectors over time.
While the country has taken significant steps with its Carbon Credit Trading Scheme (CCTS), it is still in the early stages. This means Indian exporters, especially of steel and aluminium, are not exempt from CBAM requirements.
Key Phases of CBAM:
Transitional Phase (Oct 2023 – Dec 2025):
Indian exporters must report embedded emissions in their products (Scope 1 and 2).
No carbon payment yet—just reporting and system setup.
Full Implementation (from 2026):
Importers will have to purchase CBAM certificates to offset the carbon embedded in the imported goods.
The price will reflect the EU’s carbon market rate (currently ~€90 per tonne of Carbon Emissions).
Case in Point: Indian Steel Exporter
Take the example of an Indian company exporting flat-rolled steel to Germany:
In the current transitional phase (Oct 2023 – Dec 2025), the exporter must report emissions associated with the steel's production. No carbon payment is required yet, but accurate monitoring and reporting are crucial.
From 2026 onwards, the company will be required to purchase CBAM certificates equal to the amount of embedded CO2 multiplied by the prevailing EU carbon price.
For instance, XYZ Steel Ltd in India exporting 100 tons of flat-rolled steel to Germany:
Their manufacturing process emits 2 tons of CO2 per ton of steel.
Once CBAM is fully in force, the EU importer must buy 200 carbon certificates.
At €90 per certificate, that’s an €18,000 carbon bill—just for the emissions, a significant dent in the profit margin.
This fundamentally changes the cost calculus for Indian exporters targeting the EU market.
If XYZ had installed waste heat recovery, used green hydrogen, or purchased renewable power, their carbon intensity (and thus CBAM cost) could be lower. Alternatively, if India had a carbon tax or emissions trading system equivalent to the EU ETS, that cost could be credited or partially waived.
What Indian Exporters Must Do Now
Set up GHG accounting systems (especially for Scope 1 and 2).
Implement Monitoring, Reporting, and Verification (MRV) procedures.
Start dialogues with carbon consultants and verifiers.
Look into low-carbon technologies and energy sources.
Stay updated on India’s emerging Carbon Credit Trading Scheme (CCTS).
Think of this as installing a speedometer before entering a new race track—without it, you can't know how fast (or how carbon-heavy) you're going, let alone win.
Risk of Non-Compliance
If Indian exporters fail to comply:
Risk of losing market access to the EU
Delays or rejections at customs
Additional costs imposed by importers
Can Steel Companies Declare Themselves Carbon Neutral by Purchasing Carbon Credits?
While reducing emissions at source is ideal, what role do carbon offsets play in achieving net-zero status? Can steel companies, after calculating and reducing their emissions, purchase carbon credits to become “carbon neutral”? Is it a shortcut—or a legitimate step toward decarbonization?
Coming Up Next
Stay tuned. In our next article, we’ll explore:
Can Steel Companies Declare Themselves Carbon Neutral by Purchasing Carbon Credits?
Need Help Navigating CBAM or Carbon Neutral Strategies?
BNZ Green is India’s leading climate-tech platform offering carbon accounting, MRV systems, CBAM advisory, and access to high-integrity carbon credits through its BNZ X Marketplace.
Whether you're an Indian exporter trying to meet EU CBAM requirements or looking to develop a long-term decarbonization strategy, BNZ Green can support you every step of the way — from compliance to carbon neutrality.
Reach out to our team today to get started.
Write to info@bnzgreen.io