{"id":80467,"date":"2026-01-02T12:37:14","date_gmt":"2026-01-02T07:07:14","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=80467"},"modified":"2026-01-02T17:40:23","modified_gmt":"2026-01-02T12:10:23","slug":"eus-cbam-begins-impact-on-indias-steel-and-aluminium-exports","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/eus-cbam-begins-impact-on-indias-steel-and-aluminium-exports\/","title":{"rendered":"EU\u2019s CBAM Begins: Impact on India\u2019s Steel and Aluminium Exports"},"content":{"rendered":"<h2><b>CBAM Latest News<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The European Union implemented its carbon tax on selected carbon-intensive metals from January 1, a move expected to impact India\u2019s steel exports.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The tax applies to goods whose manufacturing processes generate significant carbon emissions, reflecting the EU\u2019s push to curb carbon leakage and promote cleaner production.<\/span><\/li>\n<\/ul>\n<h2><b>EU\u2019s Carbon Border Tax Comes into Force<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The European Union has begun implementing the world\u2019s first carbon tax under the Carbon Border Adjustment Mechanism (CBAM) from January 1.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The move has drawn criticism from developing countries, including India, as it imposes a levy on carbon-intensive imports entering the EU.<\/span><\/li>\n<\/ul>\n<h3><b>What CBAM Covers<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">CBAM applies a carbon-related charge on imports from:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Power sector<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Energy-intensive industries such as cement, steel, aluminium, oil refining, paper, glass, chemicals, and fertilisers<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The mechanism targets goods originating from countries with lower environmental standards than the EU.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Importantly, EU lawmakers retain the power to expand the product list in future.<\/span><\/li>\n<\/ul>\n<h3><b>Impact on India and Developing Countries<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">India\u2019s exports to the EU are dominated by steel, iron, and aluminium, making them particularly vulnerable to CBAM-related costs.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Beyond India, the measure is expected to raise trade barriers for many developing economies.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A similar carbon border regulation is expected to be implemented by the United Kingdom this year, compounding pressures that already exist due to high US tariffs on metals imposed by the United States.<\/span><\/li>\n<\/ul>\n<h3><b>Global Pushback and Legal Challenges<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Russia formally launched a dispute against CBAM in May last year, joined by other developing nations.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The United Nations Conference on Trade and Development (UNCTAD) has warned that CBAM could:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Hurt export-led development<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Reduce market access for poorer countries<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Worsen global trade inequalities, especially if countries with carbon taxes and greener production are exempted<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h3><b>Developed vs Developing World Argument<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>EU\u2019s position<\/b><span style=\"font-weight: 400;\">: CBAM merely extends domestic environmental standards to imports, preventing \u201ccarbon leakage\u201d and ensuring fair competition.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Developing countries\u2019 concern<\/b><span style=\"font-weight: 400;\">: CBAM violates the principle of Common But Differentiated Responsibilities (CBDR), a core concept in international environmental law recognised by the World Trade Organization.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Under CBDR, all countries share responsibility for addressing environmental challenges, but obligations must differ based on: Level of development; Historical contribution to environmental damage; Capacity to respond.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h2><b>CBAM and the Shift in Steelmaking Technology<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">To comply with the EU\u2019s CBAM, Indian steel exporters are seeking government support to transition from <\/span><b>blast furnace\u2013basic oxygen furnace (BF\u2013BOF)<\/b><span style=\"font-weight: 400;\"> routes to <\/span><b>electric arc furnaces (EAFs)<\/b><span style=\"font-weight: 400;\">, which use steel scrap and are significantly cleaner.<\/span><\/li>\n<\/ul>\n<h3><b>Emissions Profile of Steel Production Routes<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Highest emissions:<\/b><span style=\"font-weight: 400;\"> BF\u2013BOF route<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Moderate emissions:<\/b><span style=\"font-weight: 400;\"> Gas-based direct reduced iron (DRI)<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><b>Lowest emissions:<\/b><span style=\"font-weight: 400;\"> Scrap-based EAF route<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Indian steel production is largely dependent on the <\/span><b>blast furnace route<\/b><span style=\"font-weight: 400;\">, making exports more vulnerable under CBAM.<\/span><\/li>\n<\/ul>\n<h3><b>Industry Demands and Trade Negotiations<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Exporters have urged the government to:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Support compliance with CBAM requirements<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Seek a <\/span><b>carve-out for MSMEs<\/b><span style=\"font-weight: 400;\"> in ongoing India\u2013EU trade deal negotiations, expected to conclude early this year<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The EU has clarified that <\/span><b>CBAM is not negotiable<\/b><span style=\"font-weight: 400;\">, as it is framed as a climate, not trade, measure.<\/span><\/li>\n<\/ul>\n<h3><b>Scrap Availability and Competitive Disadvantage<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Indian exporters have flagged that the EU is regulating steel scrap exports to strengthen domestic capacity.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The US and EU, the world\u2019s largest scrap producers, extensively use arc furnaces, potentially benefiting their steel industries under CBAM while disadvantaging Indian manufacturers.<\/span><\/li>\n<\/ul>\n<h2><b>CBAM Impact: Price Cuts Likely for Indian Exporters<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">From January 1, 2026, every shipment of Indian steel and aluminium entering the EU will attract a carbon cost under CBAM.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The Global Trade Research Initiative (GTRI) estimates exporters may need to cut prices by 15\u201322% to absorb the tax burden.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">GTRI warns that <\/span><b>MSMEs<\/b><span style=\"font-weight: 400;\"> will be hit hardest due to:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">High compliance, data, and verification costs<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Risk of being priced out of the EU market altogether<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h3><b>Data Gaps Inflate Carbon Costs<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A key challenge is the lack of plant-level emissions data:<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">Large producers often do not share verified emissions data with MSME buyers<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">In absence of verified data, EU authorities may apply default (highest) emission values, sharply increasing CBAM costs even if actual emissions are lower<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Experts suggest reducing compliance costs through Mutual Recognition Agreements (MRAs):<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">An Indian certifying body\u2019s emissions data could be recognised by the EU.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Experts caution that if competitors like China comply faster, Indian exporters could lose competitiveness.<\/span><\/li>\n<\/ul>\n<h2><b>CBAM: Trade Protection or Climate Action<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Indian trade experts argue that climate\u2013trade measures like the EU\u2019s CBAM are driven more by import curbs and commercial interests of developed countries than genuine environmental protection.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">A United Nations Conference on Trade and Development (UNCTAD) study (2021) estimated that CBAM would reduce global CO\u2082 emissions by only 0.1%, while significantly restricting exports from developing countries.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Amid concerns that CBAM breaches WTO principles, UNCTAD suggested the EU should use CBAM revenues to support cleaner technologies in developing countries.<\/span><\/li>\n<\/ul>\n<h3><b>India\u2019s Official Position<\/b><\/h3>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Finance Minister Nirmala Sitharaman termed CBAM unilateral, arbitrary, and a trade barrier, stating that measures like CBAM and the EU deforestation law undermine energy transition efforts.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">India has formally conveyed its concerns to the European Union.<\/span><\/li>\n<\/ul>\n<p><b>Source:<\/b><strong> <a href=\"https:\/\/indianexpress.com\/article\/explained\/explained-economics\/indias-metal-exports-face-22-price-cut-threat-as-worlds-first-carbon-tax-goes-live-today-10449885\/\" target=\"_blank\" rel=\"nofollow noopener\">IE<\/a> | <a href=\"https:\/\/economictimes.indiatimes.com\/news\/economy\/foreign-trade\/eus-carbon-tax-kicks-in-from-jan-1-may-hit-indian-steel-and-aluminium-exports-gtri\/articleshow\/126264519.cms?from=mdr\" target=\"_blank\" rel=\"nofollow noopener\">ET<\/a><\/strong><\/p>\n","protected":false},"excerpt":{"rendered":"<p>The EU has launched its Carbon Border Adjustment Mechanism (CBAM), imposing a carbon tax on metals. Indian steel and aluminium exports face higher costs and compliance challenges.<\/p>\n","protected":false},"author":18,"featured_media":80550,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[4516,60,22,59],"class_list":{"0":"post-80467","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"tag-cbam","9":"tag-mains-articles","10":"tag-upsc-current-affairs","11":"tag-upsc-mains-current-affairs","12":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/80467","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=80467"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/80467\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/80550"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=80467"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=80467"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=80467"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}