India Cement Aluminium Decarbonisation Faces EU Tax Risk
India’s policy pivot to cut greenhouse gas emissions in its heavy-industry base could play a pivotal role in how the country engages with the European Union’s impending carbon border pricing regime, experts say. By mapping out decarbonisation pathways for energy-intensive sectors like cement and aluminium, Indian policymakers aim to protect export competitiveness while advancing national climate commitments — with implications for jobs, sustainable growth and future trade.
India’s cement and aluminium industries rank among the nation’s largest sources of industrial emissions, accounting for a significant share of greenhouse gases (GHG). Cement alone contributes millions of tonnes of CO₂ annually, while aluminium production remains heavily reliant on fossil-fuel-intensive processes. Recognising this, the government’s advisory body has released sectoral roadmaps that set out phased decarbonisation measures, from fuel switching to advanced technologies, as part of the country’s broader net-zero ambitions. This recalibration comes against the backdrop of the European Union’s Carbon Border Adjustment Mechanism (CBAM), a trade policy designed to levy a carbon cost on imported goods whose production generates higher emissions than equivalent EU output. Initially targeting products including cement, aluminium and steel, CBAM’s regulatory scaffolding has moved from reporting requirements to financial impacts since 2023, with full cost implications expected from January 2026.
Industry analysts point out that India’s shift could reduce the risk of export erosion under CBAM. Without adoption of cleaner inputs and emissions management practices, exporters face not only tariff‐like carbon costs but also tougher purchasing decisions by European buyers weighing embedded carbon in procurement. This dynamic has already contributed to reported declines in steel and aluminium shipments to EU countries as companies adjust to CBAM’s transparency and pricing criteria. Urban planners and climate finance experts note that aligning industrial emissions profiles with global benchmarks fosters more resilient trade links and stimulates investment in low-carbon technologies. Measures such as expanding renewable energy usage, increasing material efficiency and investing in carbon capture, utilisation and storage (CCUS) can reduce lifecycle emissions and may unlock carbon credit opportunities in international markets.
However, challenges persist. Small and medium enterprises (SMEs), which comprise a large share of manufacturing output, often lack the capital and technical capacity to implement complex monitoring, reporting and verification (MRV) systems required for CBAM compliance. Without targeted financing and skills development, these firms risk lagging behind larger competitors in the transition to greener production. Economists say India’s decarbonisation roadmaps must therefore be integrated with wider industrial policy that supports inclusive growth. Strategic public-private collaboration to build domestic carbon markets, regulatory support for renewable energy integration and accessible financing solutions can help bridge gaps and safeguard market access.
As India negotiates evolving global climate trade rules, the country’s industrial decarbonisation efforts will be closely watched by investors and urban policymakers alike. While structural shifts take time, embedding low-carbon practices in core industries could strengthen export resilience, drive innovation and help meet climate targets without compromising economic opportunity.
