Opinion CBAM isn’t the end, it could be start of a green story
We either spend a decade fighting climate tariffs at WTO, or build the carbon pricing architecture that makes Indian steel the world’s cleanest and most competitive.
India’s abundant RE, low‑cost ore and 5 MMTpa ambition can dominate green metals. Indian steelmakers rang in the new year with a grim reality: The EU’s Carbon Border Adjustment Mechanism (CBAM) has exited its transitional phase and entered definitive implementation, slapping real carbon costs onto every tonne of steel, aluminium and cement crossing into Europe. Indian steelmakers do not need January’s carbon invoices from Brussels to feel the sting of Europe’s CBAM. Post-Covid, India’s iron and steel exports to the EU more than doubled, from USD 2.7 billion in FY21 to nearly USD 6 billion in FY22, briefly accounting for over 9 per cent of all exports to the bloc. But once CBAM’s transitional reporting phase began, that boom reversed sharply: By FY25, steel exports had already fallen 30 per cent versus FY24, even as total exports held steady, and by FY26, when CBAM’s definitive phase kicks in, iron and steel shipments crashed by over 51 per cent.
The December 2025 EU ETS (emissions trading system) auction at Brussels was cleared at €87.37 per tonne CO2, 5.7 per cent above recent monthly averages and far exceeding historic floors of €20-30, as buyers like RWE and ArcelorMittal paid uniform-price premiums for supply security. EU steel importers continue to source Indian volumes despite the CBAM, valuing the ore-labour cost advantages in decarbonised tonnes over cheaper, dirtier alternatives. CBAM demands reciprocal action: Align India’s MRV (measurement, reporting, and verification) systems with ETS equivalents, or cede a share to Korea’s linked ETS and Japan’s H2 partnerships amid WTO debates.
India’s National Green Hydrogen Mission’s 5 million metric tonnes per annum (MMTpa) target by 2030 is imperative for decarbonising the steel sector, utilising clean hydrogen to produce greener steel through Direct Reduced Iron (DRI). However, progress lags: Only 3 GW of electrolyser capacity has been awarded by mid-2025, against the 60-100 GW needed, keeping India reliant on imports as costs remain three times higher than global benchmarks. Projects like Sembcorp’s Tuticorin green ammonia hub face delays due to suppliers refusing to share technology IP, and were stymied by European Hydrogen Bank rules that restrict the use of Chinese electrolysers to 25 per cent of the capacity, despite their strong bids exceeding targets. India imports most of its electrolysers from China, followed by Singapore, the UK, and Germany. To accelerate green hydrogen and renewable energy capacity, India should liberalise imports not just of final green products but also intermediate goods and essential inputs, many not inherently green, used in their production. As of 2024, India’s average applied tariff stands at 11.4 per cent, double the global average of around 6 per cent.
Building green steel plants costs three times more than traditional ones, requires massive renewable energy backups, and pure green hydrogen won’t surpass old methods until around 2040 without incorporating some cleaner blends. CBAM shortens the timeline: Indian exporters must reduce emissions now and prove it, or risk losing sales to Korea’s ready hydrogen centres and Japan’s partnerships.
India’s abundant RE, low‑cost ore and 5 MMTpa ambition can dominate green metals. We either spend a decade fighting climate tariffs at WTO, or build the carbon pricing architecture that makes Indian steel the world’s cleanest and most competitive. CBAM isn’t the end; it could be India’s origin story as a green superpower.
The writer is research associate at CSEP. Views are personal
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