New Delhi: Congress leader Jairam Ramesh on Thursday suggested that the impending India-EU FTA, expected to be signed soon, must take into account what he called an “unacceptable non-tariff barrier”, referring to the European Union’s CBAM (Carbon Border Adjustment Mechanism) which is fully implemented from 2026.
In force today, CBAM is a climate policy tool introduced by the European Union, designed to set a “fair price” for carbon emissions contained in imported products and prevent “carbon leakage”.
CBAM will have to be paid by Indian exporters on certain products, even if the central government actively engages with the EU for a comprehensive trade deal.
In 2024-25, Indian exports of steel and aluminum (the products likely hardest hit by CBAM) to the EU averaged $5.8 billion. It was down from $7 billion the previous year, Jairam Ramesh wrote at X.
“In the financial year 2024-25, our steel and aluminum exports to the EU averaged $5.8 billion – having already fallen by around $7 billion the previous year as EU importers began preparing for the introduction of CBAM,” reads the Congress leader’s X message.
He also cited India’s trade-focused think tank, Global Trade Research Initiative (GTRI), which estimates that many of these Indian exporters may have to reduce their prices by 15 to 22 percent so that their European importers can use that margin to pay the carbon tax.
Further, the Congress leader asserted that the CBAM documentation requirements require meticulous accounting and reporting of carbon emissions, which adds additional costs to Indian exporters.
In this context, he suggested that “any India-EU FTA ultimately signed must take into account this unacceptable non-tariff barrier”.
Indian steel and aluminum exporters are likely to face severe pricing pressure in the European market from today as every shipment entering the European Union will incur a carbon cost under the Carbon Border Adjustment Mechanism (CBAM), according to the Global Trade Research Initiative (GTRI).
The report states that from January 1, 2026, CBAM will move from a reporting phase to a payment-related business reality. As a result, many Indian exporters may have to reduce their export prices by 15 to 22 percent so that EU importers can use this margin to pay the carbon cost of CBAM.
Although Indian exporters will not pay the tax directly, the burden will indeed fall on them. Under the CBAM rules, EU-based importers registered as authorized CBAM filers will be required to purchase CBAM certificates linked to emissions embedded in imported steel and aluminum.
However, this cost is expected to be passed on to Indian suppliers through lower prices and stricter contract terms, GTRI noted.
The GTRI report warns that CBAM will hit Indian steel and aluminum exports to the EU hard, with MSMEs likely to bear the greatest burden due to high compliance and verification costs. (ANI)
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