EU carbon tax steel industry impact is acting as a catalyst for India’s steel industry decarbonisation. In this blog, we will understand all about how the EU carbon tax is pushing India’s steel industry toward lower emissions.
EU Carbon Tax Pushes India’s Steel Industry Toward Lower Emissions
EU carbon tax steel industry impact: In a major update, the European Commission has released the first official CBAM Certificate Price Rules linked to EU ETS for Quarter 1, 2026 to be €75.36 per tonne of CO₂ (₹8,070 – ₹8,090 INR). After this significant update, the Indian Iron and Steel industry has been under increasing pressure to decarbonise to ensure cleaner export to the European market. India exported around US$3.63 billion worth of iron and steel to Europe in 2025, as per the United Nations COMTRADE database published on Trading Economics.
EU carbon tax steel industry impact: A direct hit on India's competitiveness
The CBAM’s impact is only going to increase on the Indian Iron and Steel industry. CBAM expert and founder of CleanCarbon.ai Mr Nilesh Bhattad suggests that financial impact is only going to increase further if accurate CBAM reporting and tax reduction is not ensured. In evaluating the CBAM vs. Carbon Tax landscape, he said, “The current CBAM certificate price at €75.36 per tonne of CO₂ (₹8,070 – ₹8,090 INR) is only applicable for quarter 1, 2026. This is bound to increase further in the subsequent CBAM certificate prices, causing tangible financial pain to exporters and EU-importers.”
Under the EU regulation, CBAM steel industry impact could be a severe blow as the price will be published quarterly from 2026 and weekly from 2027. This means quarterly increase in financial impact due to CBAM without effective action. Moreover, the exporters and EU-buyer will have to pay even more from 2027, when the EU will release weekly CBAM certificate prices.
When comparing CBAM vs. Carbon Tax frameworks, the former functions as a border adjustment to prevent leakage. With the CBAM Tax becoming a reality in the climate conscious global economic order, higher emissions would mean more certificates leading to higher costs. Furthermore, amid the global trade uncertainty and carbon price fluctuations, the impacts will be visible on direct profit margins.
The EU carbon tax steel industry impacts are only getting severe with every passing day as India also has its internal Green Steel Taxonomy and targets by the BEE for big companies to reduce their carbon emisisons. The pressure to push India’s steel industry toward lower emissions is also exerted by other global players.
More countries like Australia, Canada, etc are either planning to launch their own CBAM or a country like the UK is already set to roll out its domestic carbon tax from 2027. These developments only push Indian manufacturers and exporters in moving towards a low carbon economy.
CBAM steel industry impact: What are financial projections?
India exported over USD 13 billion worth of iron and steel in FY 2022–23. Of that, approximately 23.5% went to the European Union, making the bloc India’s single most consequential export destination for steel. Using a CBAM Tax Calculator, one can see that a carbon cost of USD 80–90 per tonne, applied to an emissions gap of roughly 0.7 tonnes of CO₂ per tonne of steel, translates to an additional levy of USD 56–63 per tonne at current ETS prices.
This applies before any credit for carbon priced domestically in India. Effectively, the CBAM Tax could impose an additional 25% carbon cost on Indian steel exports to the EU — a levy that would be existential for small and medium producers operating on thin margins, as per reports.
Projections are even starker over the longer horizon. Analysis from Rystad Energy suggests that by 2034 — when CBAM reaches full implementation and free EU ETS allocations are fully phased out — India could face carbon costs of up to USD 116 per tonne under a USD 100 per tonne carbon price scenario, with worst-case estimates reaching USD 397 per tonne if emissions trajectories do not improve.
The CBAM steel industry impact is further compounded by India’s production structure. Roughly 40% of India’s steel output comes from its secondary sector — small, energy-intensive Electric Arc Furnace (EAF) and Induction Furnace (IF) operators — which collectively constitute 33–35% of installed capacity. These producers rely heavily on coal-grid electricity, making their emission profiles particularly unfavourable against EU benchmarks. According to India’s Centre for Science and Environment, CBAM could impose an additional 25% in costs on CBAM-covered goods entering the EU, a burden that would be existential for smaller operators.
The MSME vulnerability due to EU CBAM
India’s MSMEs (Micro, Small and Medium Enterprises) form the backbone of its secondary steel sector, collectively accounting for 33–35% of crude steel capacity and contributing significantly to the 38% MSME share of national GDP. These enterprises face a uniquely difficult convergence of challenges: low awareness of CBAM compliance requirements, absence of robust emissions measurement systems, limited access to green finance, and an inability to absorb the capital costs of transitioning to lower-emission technologies. For these producers, CBAM is not a prod toward modernisation — it risks being a market-exit mechanism.
Critically, the iron and steel sector constitutes approximately 90% of India’s CBAM-exposed exports to the EU, even though those exports represent only 0.2% of India’s total GDP. This concentration means the macro effect is modest, but the sectoral and regional impact — particularly in steel-producing states like Odisha, Jharkhand, and Chhattisgarh — will be acutely felt.
Understanding EU carbon tax steel industry through case study
ODISHA: A STATE-LEVEL CASE STUDY IN CBAM EXPOSURE
Odisha contributes nearly 25% of India’s total steel output and hosts major producers including Tata Steel, JSW Steel, and Jindal Steel and Power. Approximately 27% of India’s steel exports to the EU originate from Odisha. The state’s producers rely heavily on coal-based blast furnace operations. The green infrastructure needed for a transition — green hydrogen supply chains, renewable energy grid access, high-efficiency furnace technology — remains insufficiently deployed, making Odisha particularly vulnerable to CBAM shocks in the near term.
Conclusion
EU carbon tax steel industry impacts are not just clearly visible now, but also have become severe in the way it affects a company financially. Even as the industry is moving in the direction of green transition, CBAM steel industry impact has exposed underlying data collection challenges. Most players in the Indian export sector have very little clue about how to gather all CBAM-relevent data and maintain their auditability records to ensure accurate CBAM compliance.
CBAM compliance should not take much of exporters’ time as they need to focus on actual business models, export expansion and gaining more market share to lead to better revenue. Hence, CleanCarbon.ai, endorsed by EEPC India and SEPC (Under the Ministry of Commerce and Industries), has developed a roadmap to take care of your end-to-end CBAM reporting.
