As the European Union (EU) gears up to implement its Carbon Border Adjustment Mechanism (CBAM), India’s steel ministry has called on domestic steel exporters to accelerate efforts to reduce their carbon emissions. This move is seen as a critical step in ensuring compliance with the EU’s stringent environmental regulations and maintaining competitiveness in the global market.
The CBAM, set to take effect from 1 January, aims to levy a carbon tax on imports based on their embedded carbon content. The mechanism targets industries with high carbon footprints, including steel, aluminium, cement, hydrogen, electricity, and fertilisers. The EU’s objective is to encourage global industries to align with its ambitious climate goals and to prevent carbon leakage—where companies might relocate production to countries with laxer emission regulations. In response, India’s steel ministry has been proactive in engaging with the industry’s major players, emphasising the urgency of transitioning to greener practices. The ministry has urged companies to adopt more sustainable technologies, improve energy efficiency, and invest in renewable energy sources. The government’s directive comes at a time when India, one of the world’s largest steel producers, faces increasing pressure to align its manufacturing practices with global sustainability standards.
The EU’s impending carbon tax is expected to have significant implications for Indian steelmakers, who have traditionally relied on coal-intensive processes. The financial impact of the CBAM could be substantial, with estimates suggesting that it could add between 20-35% to the cost of Indian steel exports to Europe. Consequently, the industry is under pressure to innovate and adopt cleaner technologies to mitigate potential cost increases and to maintain access to critical export markets. To facilitate this transition, the Indian government is exploring various support measures, including tax incentives for green investments, subsidies for renewable energy adoption, and partnerships with international technology providers. The steel ministry is also encouraging collaborations with European firms to adopt best practices in carbon management and to develop a roadmap for achieving lower emissions across the production lifecycle.
In addition, Indian steelmakers are being urged to prepare for stricter environmental reporting requirements and to enhance transparency in their sustainability efforts. The ministry is keen to ensure that companies are not only compliant with international standards but also positioned as leaders in sustainable steel production, potentially opening up new markets and investment opportunities. The move towards greener steel production is not only a regulatory compliance issue but also a strategic imperative for the Indian steel industry. With global supply chains increasingly prioritising sustainability, Indian exporters must adapt to maintain their competitive edge. The government’s proactive stance on this issue underscores its commitment to balancing economic growth with environmental stewardship, a necessity in the evolving landscape of international trade and climate policy.
