{"id":128439,"date":"2026-10-11T10:31:13","date_gmt":"2026-10-11T05:01:13","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=128439"},"modified":"2026-10-11T12:39:57","modified_gmt":"2026-10-11T07:09:57","slug":"carbon-border-adjustment-mechanism-cbam","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/carbon-border-adjustment-mechanism-cbam\/","title":{"rendered":"Carbon Border Adjustment Mechanism (CBAM): How India Could Benefit from the US Probe"},"content":{"rendered":"<h2><b>Carbon Border Adjustment Mechanism (CBAM) Latest News<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The United States Trade Representative (USTR) has launched an investigation into the European Union\u2019s expansion of its <\/span><a href=\"https:\/\/vajiramandravi.com\/current-affairs\/cbam\/\" target=\"_blank\"><span style=\"font-weight: 400;\">Carbon Border Adjustment Mechanism (CBAM)<\/span><\/a><span style=\"font-weight: 400;\"> \u2014 a move that could escalate trade tensions between the two blocs.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The USTR has invited public comments from American small businesses till November 9. Seeking public comments is typically the first step toward possible retaliation \u2014 signalling the US may push the EU to soften CBAM\u2019s implementation.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">For India, this development carries an unusual silver lining: any US-driven softening of CBAM could automatically benefit Indian exporters too, thanks to a <\/span><b>clause in the <\/b><a href=\"https:\/\/vajiramandravi.com\/current-affairs\/india-eu-free-trade-agreement\/\" target=\"_blank\"><b>India-EU trade deal<\/b><\/a><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<h2><b>What Is CBAM, and Why Is the US Investigating It?<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">CBAM is the EU\u2019s carbon pricing mechanism. It requires EU importers of goods in six carbon-intensive sectors to declare the embedded emissions of imported products and pay a carbon price equivalent to what EU domestic producers already pay.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Covered Sectors<\/b><span style=\"font-weight: 400;\">: Aluminium; Cement; Electricity; Fertiliser; Hydrogen; Iron and steel.<\/span><\/li>\n<\/ul>\n<h3><b>The US\u2019s Specific Complaint<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The EU calculates default emission values using country- and sector-level production\/energy data.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">However, the <\/span><b>EU adds a punitive mark-up<\/b><span style=\"font-weight: 400;\"> to these default values \u2014 a measure meant to push companies toward submitting verified company-level data instead.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Any company-level data must be verified by an EU-accredited third-party verifier \u2014 adding cost and compliance burden, which the US says disproportionately hurts American small businesses.<\/span><\/li>\n<\/ul>\n<h2><b>How India Stands to Benefit<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">India had tough negotiations with the EU over CBAM while finalising the India-EU trade deal, since the regulation is expected to hit a wide range of Indian metal exports.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Crucially, however, Indian negotiators secured a \u2018<\/span><b>forward-Most Favoured Nation\u2019 (MFN) CBAM clause<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>What this clause does<\/b><span style=\"font-weight: 400;\"> &#8211; It ensures that any concession the EU grants to another trading partner (here, the US) under a separate agreement automatically extends to India too.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">In the EU-US trade deal joint statement (August last year), the EU had already committed: \u201c&#8230;the European Commission&#8230; commits to work to provide additional flexibilities in the CBAM implementation\u201d for US businesses.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">If the ongoing USTR probe results in further CBAM flexibilities for the US, India would also receive those same concessions \u2014 <\/span><b>without needing to renegotiate separately<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><b>The Stakes for Indian Industry<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">According to the Global Trade Research Initiative (GTRI), CBAM could translate into a 20\u201335% tax on select Indian exports \u2014 particularly iron, steel, and aluminium \u2014 into the EU.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This is effectively being called a <\/span><b>steel bill for India<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Added complication \u2014 Steel Scrap<\/b>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The EU is the world\u2019s largest producer of steel scrap, and its move to curb steel-scrap exports, combined with CBAM, acts as a <\/span><b>non-tariff barrier<\/b><span style=\"font-weight: 400;\"> against Indian industry.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Despite Indian objections, the EU kept CBAM outside the scope of the India-EU trade deal.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Why Production Method Matters<\/b>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Blast furnace\u2013basic oxygen furnace (BF-BOF) route: highest emissions.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Gas-based direct reduced iron (DRI): lower emissions.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Scrap-based electric arc furnace (EAF) route: lowest emissions.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>India\u2019s Vulnerability<\/b><span style=\"font-weight: 400;\">: Indian manufacturers largely rely on the blast furnace route, making them currently underprepared for CBAM\u2019s carbon-price burden.<\/span><\/li>\n<\/ul>\n<h2><b style=\"font-size: inherit;\">India\u2019s Response: The Green Steel Push<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The government plans to <\/span><b>scale up scrap-based steel production<\/b><span style=\"font-weight: 400;\"> via electric arc furnace technology, under its <\/span><b>Green Steel Initiative<\/b><span style=\"font-weight: 400;\">.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">However, a May 2025 report by the Indian Council for Research on International Economic Relations (ICRIER) flagged a major constraint:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Scrap currently makes up only 20% of India\u2019s steelmaking feedstock.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">This is limited by domestic scrap availability of just ~25 Million Metric Tonnes (MMt) annually.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">The report notes: hard-to-abate sectors like steel face unprecedented pressure to decarbonise amid tools like CBAM, with scrap steel central to this transition \u2014 yet India\u2019s constrained scrap access remains a critical bottleneck.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><b>Conclusion<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The US probe into CBAM is, at its core, a dispute over how the EU prices carbon at its borders \u2014 but it has inadvertently opened a door for India.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Thanks to a carefully negotiated MFN clause, any flexibility the EU grants the US could flow to Indian exporters too, without further bargaining.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Yet this remains a short-term cushion, not a solution: India\u2019s long-term competitiveness in a carbon-taxed world will depend on how fast it can scale scrap-based, low-emission steel production \u2014 a transition still constrained by domestic scrap scarcity.<\/span><\/li>\n<\/ul>\n<p><b>Source:<\/b><strong> <a href=\"https:\/\/indianexpress.com\/article\/explained\/explained-economics\/us-probe-eu-carbon-border-tax-india-exports-cbam-10914668\/\" target=\"_blank\" rel=\"nofollow noopener\">IE<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>Carbon Border Adjustment Mechanism (CBAM) faces a US probe, while the India-EU deal may ease exporters\u2019 compliance burden.<\/p>\n","protected":false},"author":18,"featured_media":128461,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[10801,60,22,59],"class_list":["post-128439","post","type-post","status-publish","format-standard","has-post-thumbnail","category-upsc-mains-current-affairs","tag-carbon-border-adjustment-mechanism-cbam","tag-mains-articles","tag-upsc-current-affairs","tag-upsc-mains-current-affairs","no-featured-image-padding"],"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/128439","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=128439"}],"version-history":[{"count":5,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/128439\/revisions"}],"predecessor-version":[{"id":128468,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/128439\/revisions\/128468"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/128461"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=128439"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=128439"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=128439"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}