From January 1, 2026, Indian steel and aluminium exporters will face a new challenge as the European Union activates its Carbon Border Adjustment Mechanism (CBAM). This rule will attach a carbon cost to every shipment entering the EU, based on how much pollution was generated during production.

While Indian companies won’t pay the tax directly, EU importers will have to buy carbon certificates, and that cost is expected to be pushed back onto exporters. Experts warn that Indian firms may need to cut prices by 15–22% just to stay competitive in the European market.

The timing couldn’t be worse. India’s steel exports to the EU have already fallen sharply, and competition from cleaner producers is increasing. Since India is the world’s second-largest steel producer, the pressure is now mounting on manufacturers to rethink how they operate.

To survive, companies will need to measure their emissions, adopt cleaner energy, and improve efficiency. Those using low-carbon production methods could gain an edge, while high-polluting units may struggle.

The carbon tax is fast becoming more than a climate rule - it’s a trade game-changer that could reshape India’s export future.