The EU Carbon Boundary Regulation Mechanism (CBAM) may have less impact on Indian steel exports than expected, according to the country's average emissions figures, as suppliers may redirect lower-carbon production to the EU to reduce their impact, climate think tank Sandbag reported today.
Instead of using national emissions averages, the think tank assessed the impact of CBAM by looking at factors such as product categories, production routes, and existing capacities.
Overall, Indian exports are expected to be subject to CBAM duties of €762 million ($877 million) in 2034, based on national average emissions, with iron and steel accounting for the bulk of emissions, Sandbag said. According to Sandbag, the total cost of flat and long products, as well as some other iron products, is about 735 million euros.
But CBAM's expected fees for total exports will drop to 407 million euros, according to Sandbag's methodology, which suggests that suppliers are increasingly diverting products from low-emission steel production routes to the EU, while at the same time directing more carbon-intensive production to the domestic market. This "expected" scenario is a "partial redistribution of existing low-emission capacities" rather than a change in steel production technology.
In 2025, India exported about 4 million tons of CBAM-coated steel products to the EU, with flat rolled products accounting for the largest share (2.6 million tons), followed by long products (about 830,000 tons), according to Sandbag estimates. Sandbag's analysis suggests that export volumes will remain at the same level in the coming years, with a carbon price of 80 euros per tonne of CO2.
The analytical center assumes that the export of rolled products to the EU will be increasingly carried out by the ArcelorMittal Nippon Steel plant in Khazira, which produces about 8.6 million tons of finished steel per year and is heavily dependent on steel production in gas electric arc furnaces for direct reduction of iron (DRI-EAF).
When using the DRI-EAF gas furnace, the emission intensity is 1.4–1.6 t CO2/tcs compared to the basic blast furnace oxygen furnace method (BF-BOF), which emits 2.2–2.6 t CO2/tcs and accounts for more than 45% of steel production in India, according to the ministry. According to Sandbag, a significant portion of long products exports will remain competitive if production is carried out at the Tata Steel plant producing 750,000 tons of EAF scrap in Ludhiana, while pig iron exports may be replaced by gas-based DRI exports, given the growing demand in the EU.
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