EU’s CBAM expansion to impact Indian engg, auto parts, machinery exports: GTRI

The EU’s plan to expand its Carbon Border Adjustment Mechanism (CBAM), could increase carbon tax costs on Indian manufactured exports to Europe, impacting Indian engineering goods, auto parts, machinery and fabricated metal exports to the bloc, think tank GTRI said Thursday.

This development comes as the India–EU Free Trade Agreement is expected to become operational soon.

At present, CBAM applies to imports of iron and steel, aluminium, cement, fertilisers, hydrogen, electricity, and selected steel/aluminium products.


The changes include extending CBAM to around 180 additional steel-and aluminium-based manufactured products from January 1, 2028 and tightening carbon accounting rules for scrap-based production by including emissions from pre-consumer scrap.

“Together, these steps would turn CBAM from a tax mainly on steel and aluminium raw materials into a much wider carbon tax covering manufactured industrial goods,” GTRI said.

The EU proposes stricter treatment of scrap-based production wherein emissions from steel and aluminium scrap would be counted in the embedded emissions of final products. Importers claiming use of lower-emission scrap would need verifiable proof of origin and classification, which would remove the favourable treatment many recycled-metal producers currently receive.

Tougher anti-circumvention rules under which importers suspected of under-reporting emissions, changing tariff classifications, or restructuring supply chains to avoid CBAM, could face additional reporting and verification requirements are also in works.