Based on reporting by Amruta Khandekar.
A new assessment of the Carbon Border Adjustment Mechanism (CBAM) suggests that its impact on India’s steel exports to the European Union may be considerably smaller than many early projections indicated. Rather than applying national average emissions across the entire steel sector, the analysis adopts a more granular approach, taking into account individual production routes, product categories, and the ability of producers to allocate lower-carbon steel to European markets. The result is a significantly different picture of CBAM’s likely commercial impact.
Under a conventional modeling approach based on average national emissions, Indian exports would incur CBAM fees of approximately €762 million in 2034, with iron and steel accounting for around €735 million of that total. However, the report argues that producers are unlikely to behave this way in practice. Instead, exporters are expected to redirect output from lower-emission facilities towards the European market while supplying higher-emission production elsewhere. Under this “expected” scenario, total CBAM fees fall to €407 million, with net costs estimated at just €79 million after accounting for higher European steel prices as free EU ETS allowances are phased out.
The analysis highlights the importance of production pathways. Gas-based direct reduced iron-electric arc furnace (DRI-EAF) facilities, such as ArcelorMittal Nippon Steel’s Hazira plant, produce steel with an emissions intensity of around 1.4-1.6 tonnes of CO₂ per tonne of crude steel, substantially below the 2.2-2.6 tonnes associated with the traditional blast furnace-basic oxygen furnace route, which still accounts for more than 45% of India’s steel production. This creates opportunities for lower-carbon facilities to remain competitive in the European market despite the introduction of CBAM. Perhaps the most important takeaway is that CBAM should not be viewed simply as a uniform tariff applied equally across an entire country or industry. Its economic impact depends increasingly on plant-level emissions, product characteristics, production technologies, and commercial strategy. Companies able to demonstrate lower embedded emissions may experience significantly lower compliance costs than broad national averages would suggest.
FACS Perspective
At FACS, we see this analysis as an important reminder that carbon markets are becoming increasingly data-driven. As CBAM develops, broad assumptions about sectoral or national carbon intensity are gradually giving way to more detailed assessments based on individual production assets, verified emissions data, and transparent reporting.
For businesses, this has significant strategic implications. Competitive advantage will depend not only on reducing emissions but also on accurately measuring, verifying, and communicating carbon performance. Companies that invest in robust emissions accounting and product-level carbon data will be better positioned to demonstrate compliance and potentially reduce their exposure to carbon costs. Success under mechanisms such as CBAM will increasingly be determined by data quality, operational flexibility, and the ability to align commercial strategy with evolving carbon regulations.
This article is based on publicly available reporting by Argus Media. All rights, including copyright, remain with the original source.