Govt expects EU carbon tax to hurt only 1.8% of exports

After being passed by lawmakers of the 27-nation bloc, the Carbon Border Adjustment Mechanism (CBAM) Bill is expected to come into force this month, empowering the bloc to charge a Carbon Border Tax (CBT) on imports of steel, aluminium, fertilizer, electricity, cement and hydrogen from January 2026.

- Ravi Dutta Mishra

The world’s first carbon tax, approved by the European Parliament last month, could impact no more than 1.8% or $8 billion of India’s exports, according to an internal assessment by the commerce ministry.

After being passed by lawmakers of the 27-nation bloc, the Carbon Border Adjustment Mechanism (CBAM) Bill is expected to come into force this month, empowering the bloc to charge a Carbon Border Tax (CBT) on imports of steel, aluminium, fertilizer, electricity, cement and hydrogen from January 2026.

“Of the five products in CBAM, cement, fertilizer and electricity exports to the EU are nil. And if you look at steel and aluminium, the exports are not more than 1.8% of the total exports. It is a small portion but it is a concern. But while it is a challenge for the industry it is also an opportunity (for greening the Indian manufacturing process)," a government official said.

In 2021, steel exports at $4.1 billion, and aluminium $2.7 billion were India’s 5th and 7th largest exports to the EU.