This report makes a granular assessment of India’s ability to remain competitive in the EU market under the CBAM.
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Executive Summary
India’s exposure to the CBAM is substantial with regards to the size of its iron and steel exports to the EU and the high emission intensity of its steelmaking industry.
However, the picture changes markedly once the country’s heterogeneity, likely industry response, and price effects in EU markets are taken into account. Although in a “business-as-usual” scenario where CBAM fees are calculated based on national average emission intensities, Indian exports are charged €762 million in CBAM fees in 2034, applying national average emission intensities makes little sense in a country with such a heterogeneous steelmaking industry.
This report therefore makes a more granular assessment of India’s ability to remain competitive in the EU market under the CBAM, considering the types of goods exported, the capacity available of each production route, their suitability for exports based on geographical location, and their likely ability to meet MRV requirements.
We found that India’s exposure is mostly due to steel products. In 2025, the country’s 4.00 million tonnes of CBAM-covered steel exports were mostly comprised of flat products (2.59 million tonnes), followed by long products (0.83 million tonnes) and other products (0.57 million tonnes) such as ferro-alloys or pig iron.
The country’s 2.6 million tonnes of flat steel exports would easily be matched by its low-emission production capacity using iron produced from natural gas. However, not all the plants using this technology are suitable for exporting to the EU under the CBAM regime. Geographical location matters, and so do the newly introduced anti-circumvention rules, which ban factories with multiple production lines from reporting emissions solely from one process.
But India’s ArcelorMittal’s NS Hazira plant fares well according to these criteria. The plant has sufficient manufacturing capacity of relatively low-carbon steel.
If the CBAM was extended to downstream products (as has been proposed by the European Commission starting in 2028), the plant’s capacity could also produce enough steel to cover exports of those downstream goods. The plant’s activity would require some small adjustments to make the most of CBAM reporting rules, as it has both blast furnace and DRI capacity.
The picture for long steel exports is less positive, as those exports face tougher competition with an EU market already dominated by scrap-based metallurgy which will face lower carbon costs. Regarding other steel products, the main expected change is a shift of exports from pig iron to DRI.
Taking into account the above adjustments, we estimate that a more realistic, “expected” scenario will reduce CBAM fees down to €407 million, and net CBAM costs to as little as €79 million under the scheme’s current scope, once extra revenues from higher EU prices are taken into account. This scenario does not assume any new investment or technological change.
In the longer term, our “ambitious” scenario assumes that dedicated installations such as JSW Steel’s Salav planned expansion using natural-gas based DRI only will supplant the Hazira hybrid plant as a departure point for Indian exports, with even lower emission intensity. Our ambitious scenario incorporates projects in other sectors, such as AM Green’s green ammonia project. Under this scenario, net annual costs under the current CBAM scope turn into a net profit of €44 million.
The structure of India’s CBAM-goods exports to the EU, which are dominated by basic steel products, rather than highly transformed ones, means that downstream extensions of the CBAM would not materially increase its impact on the country’s competitiveness. However, if India wanted to increase its exports of finished goods to the EU, a deeper transformation of its steelmaking would be necessary. This is because remaining competitive requires only exporting products made from low-carbon crude steel, which is more difficult to ensure in a heterogenous industry, as goods incorporate multiple parts from various sources.
Key findings:
- Taking into account optimisations made by exporters and rising EU market prices, total CBAM costs may drop from €762 million to only €79 million.
- If new low-emission capacity is deployed, the impact could turn into a net profit of €44 million.
- There are nuances across product types. However, for most exports, we identified Indian steel plants with emission intensity levels low enough to gain from the CBAM. Other criteria such as geographical location, readiness for CBAM reporting and new anti-circumvention rules, still leave significant low-emission manufacturing capacity such as ArcelorMittal’s Hazira plant to remain competitive in EU markets.
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