The EU’s Carbon Border Adjustment Mechanism (CBAM) moves into its definitive (payment) phase from January 1, 2026, meaning covered imports such as steel and aluminium entering the EU will carry an emissions-linked carbon cost.

India-focused think tank GTRI warns the shift could compress margins for Indian exporters, estimating that many may need to cut prices by ~15–22% so EU buyers can accommodate the CBAM cost.

Under CBAM, EU importers (authorised CBAM declarants) buy certificates linked to the embedded emissions in imported goods, but the cost is expected to be passed back through pricing to suppliers.

GTRI highlights that emissions intensity matters: in steel, BF–BOF routes are highest, while DRI is lower and scrap-EAF is lowest; in aluminium, the electricity source is a critical driver of carbon burden.The note also stresses compliance: exporters must maintain installation-level emissions accounting, and from 2026 third-party verification becomes mandatory otherwise the EU may apply conservative default values, potentially 30–80% higher than actual emissions

India’s steel and aluminium exports to the EU fell 24.4% in FY25 to $5.82 billion, and CBAM remains a key friction point in India-EU trade discussions.

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