EU Carbon Border Adjustment Mechanism Impacts India-EU Steel Trade
The European Union's Carbon Border Adjustment Mechanism (CBAM) is beginning to reshape the trade dynamics between the EU and India, particularly in the steel sector. The CBAM, which was announced in 2023, aims to level the playing field by imposing a levy on imports based on their carbon content. This policy is designed to ensure that EU consumers face the same carbon price for emissions embodied in goods, regardless of their origin. The mechanism has started to affect Indian steel exports to the EU, with a noticeable decline in exports from high-emission firms. The analysis, based on data from Climate TRACE and Panjiva, shows that larger Indian steel exporters are adjusting to the new regulations, while smaller firms may face more significant challenges.