The EU's carbon border adjustment mechanism (CBAM) could have a smaller effect on Indian steel exports than estimated, national average emissions suggest, as suppliers can redirect lower-carbon output to the bloc to reduce their exposure, climate think tank Sandbag said today.
Instead of using country-wide average emissions, the think tank assessed CBAM's effect by considering factors such as product categories, production pathways and existing capacities.
Overall, Indian exports are expected to incur CBAM fees of €762mn ($877mn) in 2034 using national average emissions values, with iron and steel making up the bulk of the exposure, Sandbag said. Together, flat and long steel, as well as some other iron products, account for about €735mn of those charges, according to Sandbag data.
But expected CBAM charges for overall exports fall to €407mn under Sandbag's methodology, which assumes suppliers increasingly channel output from lower emission steel production routes to the EU, while directing more carbon-intensive production to the domestic market. This "expected" scenario represents a "partial reallocation of existing low-emission capacity", rather than a shift in steelmaking technology.
India exported about 4mn t of CBAM-covered steel products to the EU in 2025, with flat steel accounting for the largest share at 2.6mn t, followed by long products at about 830,000t, according to Sandbag estimates. Sandbag's analysis assumes export volumes remain at the same levels in coming years and a carbon price of €80/t CO2.
The think-tank assumes EU-bound flat steel exports will increasingly be supplied by ArcelorMittal Nippon Steel's Hazira plant, which has about 8.6mn t/yr finished steel capacity and relies heavily on gas-based direct reduced iron-electric arc furnace (DRI-EAF) steelmaking.
The gas-based DRI-EAF route has an emissions intensity of 1.4-1.6t CO2/tcs, compared with the blast furnace-basic oxygen furnace (BF-BOF) method, which emits 2.2-2.6t CO2/tcs and accounts for more than 45pc of India's steel production, according to ministry data. A large portion of long steel exports would remain competitive if the output is from Tata Steel's 750,000 t/yr scrap-based EAF in Ludhiana, while pig iron exports could be substituted by gas-based DRI exports, given rising demand in the EU, Sandbag said.
Sandbag also considers "net costs", which account for higher steel prices in Europe as free emission allowances are phased out, allowing exporters to recover part of their CBAM costs by raising prices. The loss on Indian hot-rolled flat steel exports under the 7208 HS code falls from €97/t under a national average emissions approach to about €5/t when exports are sourced from lower-emission Indian plants, the report said.
Sandbag has also mapped out an "ambitious" scenario, in which new low-carbon steelmaking capacity is added and the use of scrap in steel production increases.
