European Commission study on the potential extension of the scope of the CBAM to downstream products
European Commission Directorate-General for Taxation and Customs Union (TAXUD) is conducting a Study on a potential CBAM scope extension to downstream products.
The objective of this study is to assess the feasibility of extending the scope of the CBAM to products further down the value chain (downstream products) of the goods that are currently listed in Annex I of the CBAM Regulation (upstream CBAM basic goods).
The purpose of including downstream products is to mitigate the risk of carbon leakage of upstream CBAM basic goods as well as the downstream products.
As part of the study, they are carrying out a stakeholder survey. The aim of this survey is to gather both evidence and the views of relevant stakeholders on the major concerns, areas of consensus or points of contention as regards a CBAM scope extension to downstream products.
Particularly, input is sought on the administrative burden and costs importers of downstream products may face in complying with the CBAM if the scope were to be extended to downstream products.
The survey will be open from today until October 25th, 2024.
You can find the link to the survey here: CBAMScopeDownstream2024
Password: CB4M_d0wnstream
More background information n the objectives of the study can be found in the introductory section of the survey.
CBAM is step forward but not enough to rebalance global markets, European IREPAS conference attendees say
CBAM, a carbon tariff for all carbon-intensive products imported into the European Union, was passed by the European Commission in December 2022 and its transitional phase began in October 2023.
Starting in October 2023, buyers of goods originating outside the EU must purchase certificates which equal the total emissions in the production of the goods.
There is no limit to the number of certificates that can be purchased to avoid restricting trade.
The cost of these certificates are calculated by the European Commission on a weekly basis according to the average price of the closing EU Emission Trading System (ETS) carbon dioxide (CO2) allowances for each week.
Impact of CBAM
CBAM can help to address imbalances related to European companies who are constrained by carbon taxes attempting to compete with countries who are not subject to any regulatory strictures, Louis Redshaw, Founder of Redshaw Advisors, told IREPAS attendees.
CBAM will help reduce carbon leakage, Redshaw said.
Carbon leakage was described when, for reasons of costs related to climate policies, businesses were to transfer production to other countries with more relaxed emission constraints, in turn resulting in an increase in their total emissions.
By placing a fair price on the carbon emitted during the production of all carbon-intensive products entering Europe, European mills, who currently need to pay for carbon credits equivalent to their carbon emissions, will be on a more equitable basis with importing countries who do not currently have the same taxes in place.
Some European market participants, however, were skeptical about how effective CBAM would be in rebalancing the playing field.
Carbon credits
European companies must buy carbon credits, normally from the government, to produce steel. When a company buys a carbon credit they can generate one ton of CO2 emissions.
The development of carbon credits turned carbon dioxide into a commodity, which could be monetized like any commodity.
Currently, the top 10% of the lowest emitting steel producers in Europe do not pay for carbon credits, while the remaining 90% of European steel producers have to pay varying amounts for carbon credits to offset their carbon emissions.
Pre-CBAM, European domestic mills were burdened by the cost of climate policies which non-EU countries were not, making them uncompetitive.
“CBAM will help to make competition fair. If importers are not taxed similarly to European mills, the European steel industry will die,” Redshaw said.
The greater a producer’s emission, the more they need to pay for carbon credits, thus incentivizing them to invest in decarbonizing processes.
By ensuring all countries importing steel into Europe have to pay similar amount, sustainable goals do not stop EU countries from being competitive or profitable.
Market responses
Many conference attendees felt that CBAM could help support European mills remain competitive when faced with so many economic challenges.
Some non-European exporters who were already providing CBAM certificates to buyers in Europe importing their stock, reported high levels of bureaucracy involved with submitting the correct information quarterly.
“It will help to put a fair price on the carbon emitted. Steel producers in Egypt who export to EU have already been asked to fill in necessary paperwork for CBAM. This is a very bureaucratic procedure and may become a burden in the future for producers,” a producer source from Egypt told Fastmarkets.
“CBAM will help support European mills and global targets towards becoming more sustainable,” a second producer source from Egypt said.
Skepticism
Some sources, especially in Europe, did not think CBAM would either encourage global decarbonization or significantly rebalance global markets.
CBAM has put a cost on carbon, but it is not enough to counter the other factors which have resulted in a lack of balance in the global markets, these sources said.
These factors included foreign country subsidies, lower gas and electricity costs, lower labor costs and lower or no regulations in the construction sector, the sources added.
These more skeptical market participants felt that by just putting a price on ‘carbon’, other key areas which required addressing were not being considered.
“Europe has been affected and limited by its own desire to become carbon efficient and this has been a contributing factor to Europe losing market share of steel production, weakening domestic demand and becoming uncompetitive domestically,” a German trader said.
Europe is currently trying to decarbonize, digitize and remain profitable, sources said. But, at least in the short term, the goal of decarbonizing is at odds with the goal of profitability, Fastmarkets heard.
“European producers don’t just have to deal with the carbon issue, they also have to deal with high energy costs because of high taxation on energy and renewable energy transformation and high energy costs and importing expensive raw materials and finding the money to invest in decarbonizing technology,” a producer source from Spain said.
Whereas there is a lot of pressure from every side to transition to low-carbon environment in Europe, this is not the same in non-EU countries.
In other countries, for example China and Algeria, where the steel industry is buoyed up by subsidies, carbon tariffs like CBAM will not incentivize them to decarbonize.
“China will just pay the increased costs with the massive government subsidies they receive. They will continue to emit just as much carbon and will continue to have far lower costs,” a trader at the conference said during a panel discussion.
“Even with CBAM and all countries importing into Europe having to pay for the cost of their carbon footprint, they still remain more competitive because of cheaper energy costs and cheaper labor costs,” a second producer source from Europe said.
Seven key things Fastmarkets learned during Irepas Fall 2024 meeting
More than 490 delegates from around the world gathered in Paris on September 15-17 to network and to participate in this key event for long steel producers.
Here are the seven main topics that were discussed at the conference:
Chinese dominance
China’s dominance in the international steel market has strengthened over the past year amid a drop in domestic demand and insufficient production cuts, and it was highly likely to continue in 2025.
Yeoh Wee Jin, secretary general of the South East Asia Iron & Steel Institute (SEAISI), described this year’s events in China as “a third tsunami” during a panel at the Irepas event. He expected the country’s steel exports to exceed 100 million tonnes this year, compared with 89 million tonnes in 2023.
Fall in iron ore prices
The decrease in steel production in China resulted in a fall in iron ore prices, as well as the accumulation of a significant stock of iron ore. Wilhelm Alff, chairman of the Irepas traders’ committee, said that iron ore stocks at Chinese ports currently totaled 149 million tonnes.
Fastmarkets’ daily index for iron ore 62% Fe fines, cfr Qingdao, has averaged $91.87 per tonne so far in September, compared with an average of $135.03 per tonne in January this year.
Meanwhile, scrap collection in Europe and the US has slowed down, Jens Björkman, the chairman of the raw material suppliers’ committee, said. This helped to support prices for the product despite delayed demand in Turkey.
The Middle Eastern country has switched to purchases of Chinese steel billet since the summer, when prices for the material became low enough to make production of rebar from billet more attractive than from scrap.
Fastmarkets’ daily index for steel scrap, HMS 1&2 (80:20 mix), North Europe origin, cfr Turkey, has averaged $363.36 per tonne so far in September, compared with $414.12 per tonne in January 2024.
Consequently, iron ore prices fell by almost 32% in the period under consideration, while those for scrap fell by 12.23%, making the blast furnace steel production route more profitable.
“Everybody wants to be a blast furnace-based steel producer for the next six months,” Alff said.
Shift in Turkey
Chinese steel prices remained attractive, including those for billet, so it was highly likely that Turkey would continue to meet its needs through billet imports, which would result in lower steel output in the country.
This situation could also exert pressure on scrap prices.
Trade defense
Turkey itself was limited in its long steel export opportunities at the moment, considering the imposition of trade defense measures in the US and in Canada, the almost-complete take-up of import quotas in the EU for the third quarter of 2024, with tonnages already sold for delivery in the fourth quarter, and with recent restrictions on the supply of steel products to Israel.
Some countries that formerly procured long steel from Turkey – such as Egypt, Algeria and states in the Gulf region – have become exporters themselves, according to the chairman of the Irepas producers’ committee, Murat Cebecioglu.
Yemen, plus a few other countries in the Middle East, and Latin America were currently the key destinations for Turkish long steel exports, he added.
Regional differences
Looking at the EU, Cebecioglu said that business has seemed to be at a standstill in the region for more than a year, and little or no improvement was expected in the next six months or so, a point on which other delegates at the event agreed.
Gulf Co-operation Council (GCC) countries were currently in a slightly better position than those in other regions because their economies were moving in the right direction.
New projects in Saudi Arabia, for example, were creating demand in the region, with the construction and real estate sectors being the driving forces.
Yeoh said that ASEAN economies were also growing, albeit more slowly because of the generally unfavorable situation globally. He said that the construction sector was booming across the region, except in Thailand. Meanwhile, manufacturing was weakening, mainly due to soft external demand.
Earlier this year, he said that ASEAN steel demand was expected to reach 76.5 million tonnes in 2024, up from 73.5 million tonnes in 2023.
Overcapacity in Asia
Meanwhile, unsustainable overcapacity and de-greening were in prospect in Southeast Asia, with at least 104.4 million tonnes per year of new capacities expected to come onstream by 2030. These would push the region’s total capacity to 181.5 million tpy if they were all implemented, Yeoh said.
Around 83.6 million tpy of new capacity would be based on blast furnace-basic oxygen furnace technology, Yeoh said, while only 20.8 million tpy would be based on direct reduced iron (DRI) and electric-arc furnace (EAF) capacities, and this would lead to an “explosion” of greenhouse gas emissions by the region.
Decarbonization
At the same time, Europe’s imposition of its CBAM regulations and the global trend for decarbonization were other major topics at the Irepas event.
Since its start in October 2023, buyers of goods originating outside the EU must purchase certificates corresponding to the total volume of greenhouse gas emissions created by the production of the goods.
The costs of these certificates are calculated by the European Commission on a weekly basis, related to the average price of the closing EU Emission Trading System (ETS) carbon dioxide (CO2) allowance for each week.
By placing a fair price on the carbon emitted during the production of all carbon-intensive products entering Europe, European mills that currently must pay for carbon credits equivalent to their carbon emissions will be put on a more equitable basis with producers that operate in exporter countries that do not impose similar taxes.
Opinions were divided on the effects of the CBAM rules on the European market – and beyond it. Many delegates to the Irepas event felt that CBAM could help European mills to remain competitive when faced with economic challenges. Some sources, however, did not think that CBAM would either encourage global decarbonization or significantly rebalance global markets.
CBAM has put a cost on carbon, but it was not enough to counter the other factors which have resulted in a lack of balance in the global markets, these sources said.
These factors included foreign country subsidies, lower gas and electricity costs, lower labor costs, and fewer or no regulations in the construction sector, the sources added.
Global overcapacity was also expected to slow the decarbonization transition and to hamper innovation, Luciano Giua, economic and policy analyst at the Organisation for Economic Cooperation & Development (OECD), said during the event.
Published by: Vlada Novokreshchenova, India-Inés Levy
WTO, steel industry urge interoperable carbon pricing
Panellists at the recent WTO Public Forum focusing on steel sought to explain how interoperable carbon pricing mechanisms could support decarbonisation, Kallanish not
WTO deputy director-general Jean-Marie Paugam said interoperability is crucial in carbon measurement and trade mechanisms, emphasising the shared responsibility between the private sector and government.
Ola Hansen from Stegra, formerly H2 Green Steel, asked panellists how market mechanisms and policy instruments could be developed to support decarbonised steel in new markets, noting “deep green steel comes at a higher cost, making carbon pricing essential”.
Panellist Edwin Basson, director general at worldsteel, emphasised that putting a price on emissions, such as through CBAM, is essential for creating a global market, as many regions are considering similar mechanisms.
“CBAM plays now much more than just a European role. It is setting an expectation in other regions of the world as well. A common arbitrage mechanism for CO2 emissions could compel society to bear the costs of carbon emissions,” he noted.
“The key question is whether global systems can be developed that, while different, are interoperable – meaning they allow the comparison and trading of emission costs across various markets. This would be crucial in moving away from the need to subsidise CO2 reduction efforts globally, as a standardised system would drive the reduction of emissions by making their costs explicit and comparable worldwide,” he added.
Lower costs for green steel could come via trade facilitation and reducing regulatory burdens, according to Adina Renee Adler, executive director at the Global Steel Climate Council. “There’s likely a communications issue; as a trade policy community, we don’t always effectively convey what we’re doing,” she said.
Improving communication on the benefits of trade could generate widespread support, which would help lower product costs, even when initial production costs are high.
Meanwhile, Annie Heaton, chief executive at ResponsibleSteel, warned against using carbon policies for other purposes, like addressing overcapacity, instead of focusing solely on decarbonisation.
“We need to ensure that carbon policies are designed not to deal with that [overcapacity] but to deal with the climate change issue,” she opined.
Anne van Ysendyck, vice president and head of government affairs and environment at ArcelorMittal, highlighted the long-term challenge of higher costs associated with low-carbon steel.
She emphasised the need for uniform carbon pricing, such as through CBAM, but also stressed that incentivising both the production and consumption of low-carbon steel is crucial. Building up scale and addressing energy costs will take time and societies may need to bear higher costs in the short term to drive progress, according to Van Ysendyck.
She also underscored the importance of ensuring that measures are implemented globally and that both production and consumption incentives are effectively supported.
Marc Delobelle, head of fossil-free materials purchasing at Volvo Group, meanwhile, acknowledged there is a premium for green steel but stressed the importance of scaling production to reduce costs in the long term.
Elina Virchenko UAE
CBAM to change dynamics of global steel trade: Kardemir CEO
Carbon Border Adjustment Mechanism (CBAM) and the EU’s Green Deal are expected to change the dynamics of the global trade in the coming years, as producers’ which will not invest in reducing their carbon emissions will lose their competitiveness due to the new carbon tax burden, Ismail Demir, chairman of Turkey’s largest integrated long steel producer Kardemir said.
“Turkey, which is making half of its exports to the European Union, could not remain out of these regulations,” Demir said in a statement that he made at the company’s 29th Ordinary General Meeting May 30.
Following the announcement of the Carbon Border Adjustment Mechanism (CBAM) by the European Union, Turkey unveiled its ‘Green Deal Action Plan’ in July 2021 as a road map to realize the transformation of Turkey to a more source-efficient and a green economy.
Highlighting that CBAM will directly affect steel, aluminum, cement and fertilizer sectors, Demir said they have focused on low-carbon steel production in recent years.
“In this regard, our studies are ongoing to build our new planned blast furnace with a technology that fits our green steel target,” he said, adding that the new blast furnace will raise Kardemir’s crude steel capacity by 1 million mt/year to 3.5 million mt/year.
Kardemir is aiming to reduce carbon emissions by 15% until 2030 and to become carbon neutral by 2053, the company said, without citing the current carbon emission level of Kardemir.
Kardemir currently has a 2.5 million mt/year liquid steel capacity and produces billet, rebar, wire rod, sections and angles. It has expanded its product range over the last few years to include rails, railway wheels, thick wire rods, and heavy sections.
Turkish mills’ rebar export prices inched lower on May 30, amid lower mill offer prices and lower-priced deals in a slow market.
Platts assessed Turkish exported rebar at $572.50/mt FOB May 30, down $2.50/mt on day, according to S&P Global Commodity Insights data.
Cenk Can
EC implements 15pc cap on HRC other countries quota
The European Commission is implementing a 15pc cap on any individual country selling hot-rolled coil into the quarterly other countries quota of its steel safeguard.
This effectively caps any country selling into the other countries at 141,849t/quarter for the rest of this year: the other countries quota for July-September and October-December will be 945,664t.
If no grace period is granted, sources suggest this could lead to significant duties being incurred on 1 July, as many countries will have more than 15pc of the other countries volume in transit to the EU.
The commission decided against any other individual country quotas on HRC, the notification said.
The commission has been carrying out its review of the steel safeguard for months now. Market sources had anticipated Vietnam would get its own quota, while in recent months there have been suggestions Japan actively asked for its own quota.
The liberalisation rate has also been reduced from 4pc to 1pc.
The commission also notified the WTO the safeguard would be extended for two years, meaning there will be a brief six-month overlap between the safeguard and the imposition of the financial component of the carbon border adjustment mechanism (CBAM).
“The commission also established the surge of imports from certain new origins was related to growing overcapacity in certain regions as well as to the significant pressure exerted by a strong increase in Chinese exports to certain markets,” it said in the notification. China has been exporting record volumes of HRC this year, with significant tonnage going into nearby markets, such as Vietnam.
The changes to the safeguard are subject to approval by member states, and the commission will hold consultations from 29 May until June 10 on the proposal.
CBAM circumvention threat concerns European distributors
European steel service centres are concerned that some large, first-tier customers are turning to imports from outside the EU of the final, steel-containing product as these do not come under the Carbon Border Adjustment Mechanism (CBAM).
Suppliers from Asia are meanwhile looking for workaround solutions and are threatening the European metalforming industry and service centres. So was the conclusion of last week’s working group meeting hosted by European distributors’ association EUROMETAL.
“Scared by the impact of CBAM, some large customers (1st tiers) are looking for external alternatives outside European borders and opting to import ready-to-use steel products, in order to circumvent the regulation,” EUROMETAL says in its meeting summary.
“This trend deeply worries service centres, especially considering the current period of moderate activity. Already facing significant investments in decarbonisation and cost optimisation, CBAM throws another wrench into an already challenging situation,” it adds.
“The future of European steel processing hinges on the industry’s ability to adapt to the demands of CBAM while remaining competitive. Collaboration and innovation will likely be key to weathering this storm,” the association concludes.
Adam Smith Poland
Steel Service Centers concerned about the impact of CBAM
Last Thursday, EUROMETAL’s “SSC Arbeitskreis” (Steel Service Center Working Group) brought together industry leaders from Germany, Austria, Netherlands, and Belgium. The somber mood reflected concerns over the impact of the Carbon Border Adjustment Mechanism (CBAM) on the future of European steel processing.
Over two dozen steel executives grappled with the current economic climate – both German and global – alongside pressing issues like decarbonization, energy efficiency, workforce security, and distribution challenges. However, decarbonization, particularly CBAM, dominated the discussions.
Customers Seek Workarounds, Threatening Service Centers
Suppliers from Asia are looking for workaround solutions and are threatening European metalforming industry and service centres and ultimately also the European steel mills.
Participants at the conference reported on the fears of the forming and steel processing industry (laser and welded components) regarding the future of European steel supply chains.
Scared by the impact of CBAM, some large customers (1st tiers) are looking for external alternatives outside European borders and opting to import ready-to-use steel products, in order to circumvent the regulation.
This trend deeply worries Service Centers, especially considering the current period of moderate activity. Already facing significant investments in decarbonization and cost optimization, CBAM throws another wrench into an already challenging situation.
The Need for Collaboration
Despite the gloomy outlook, the working group highlighted the importance of ongoing dialogue and collaboration within the industry. The active participation throughout the event underscored the need for such forums to navigate the current complexities and develop solutions.
The future of European steel processing hinges on the industry’s ability to adapt to the demands of CBAM while remaining competitive. Collaboration and innovation will likely be key to weathering this storm.
Looking Ahead
The positive spirit of collaboration continued beyond the discussions. The intention to repeat the event in spring 2025 has already been announced, with the German city of Bönen as the probable location. This commitment to ongoing dialogue bodes well for the industry’s ability to navigate the challenges ahead.
How will the EU’s CBAM impact global iron and steel?
The Carbon Border Adjustment Mechanism has big implications for international trade patterns.
While it’s an EU regulation, the Carbon Border Adjustment Mechanism (CBAM) aims to encourage decarbonisation at a global level. As the new rules will affect anyone who exports to the EU, it promises to have significant consequences for international trade.
In our latest insight, our metals and mining sector analysts set out the details of the Carbon Border Adjustment Mechanism and assess its implications for the iron and steel sector, which is the largest by import value of the six sectors covered by the first phase of the scheme.
Fill out the form to download a free extract from the report, or read on for an overview that touches on the implications for other commodities.
What is the Carbon Border Adjustment Mechanism?
The CBAM aims to address the issue of so-called ‘carbon leakage’. The EU defines carbon leakage as ‘the situation that may occur if, for reasons of costs related to climate policies, businesses were to transfer production to other countries with laxer emission constraints’.1 The EU looks to address the risk of carbon leakage by taxing imports to equalise the carbon price paid by EU and non-EU products.
What sectors does it cover?
Initially, the CBAM will cover six sectors, with a focus on carbon-intensive and trade-exposed industries that are at the high risk of carbon leakage. These are electricity, hydrogen, cement, fertilisers, aluminium, and iron and steel. Later it will be extended to all sectors covered by the EU’s Emissions Trading System (ETS) by 2030. The bloc will also assess whether to extend the mechanism to organic chemicals and polymers by the end of the transition period, and will look at the potential to cover indirect emissions for more sectors and a wider range of downstream products.
When does it come into effect?
- October 2023 – Transitional period: Importers of products covered by the initial scope only have reporting obligations for the purpose of the CBAM
- January 2026 – Financial obligations commence: Importers will face financial obligations of surrendering CBAM certificates, which will ramp up progressively. Free allowances for CBAM-targeted sectors under the EU ETS will start to phase out.
- On or before 2030 – Extension: Regulations will be widened to all sectors covered by the EU ETS
- By 2034 – Full implementation: The CBAM will reach full effect for the initial batch of sectors and allowances will be all allocated via auctions for these sectors under the EU ETS
How will it work?
Until now, industrial installations within the EU considered to be at significant risk of carbon leakage have been receiving free allowances under the EU ETS to support their competitiveness. The CBAM will replace these free allocation, which will be phased out between 2026 and 2034 at the same pace as the CBAM is phased in.
CBAM financial obligations will be determined by the embedded emissions of imported goods and the price of the CBAM certificate, which is based on the EU ETS price. Carbon price effectively paid in the export country can be deducted (see diagram below).
Why has iron and steel been chosen?
The iron and steel sector is large, trade exposed and emissions intensive, making it a prime candidate for inclusion in the CBAM. European producers face significant competition, with 30% of EU demand for steel basic materials and key intermediates met by foreign supply. Price is a major factor, with EU steel producers facing higher production costs than their foreign competitors. As the energy transition progresses, higher carbon prices will further corrode their competitiveness.
Emissions from crude steel production in most of the bloc’s major steel trade partners, including China, India and Russia, are notably higher than the EU average, yet none of these countries places a carbon price as high as the EU’s. The CBAM is intended to address this discrepancy and create a level playing field for domestic production. The mechanism will cover CO2 emissions from a range of imported products, including pig iron, semi-finished and finished steel, some fabricated steel, and downstream items like nuts, bolts and screws.
What will the impacts of the CBAM be?
In the long term, the CBAM could lead to global decarbonisation of affected sectors and downstream consumption. However, collateral damage should also be expected.
Cost growth will be moderate in the first few years of the CBAM payment. During this period, exporters to the EU could reorganise their production and sales to direct lower-emissions products to the European market as a short-term fix. However, they may simply avoid the higher cost of operating in the EU market, creating supply shortages. Meanwhile, carbon costs will rise for EU producers as free allowances are phased out.
In the longer term, however, carbon will become an increasingly important cost component to consider. This will eventually impact steel trading patterns and encourage exporters to the EU to invest in emissions reduction technology. At the same time, the bloc’s trading partners will be incentivised to introduce or raise their own domestic carbon prices to prevent revenue leakage (although it should be noted that they are likely to remain structurally weaker than the EU’s).
On the downside, higher carbon costs and disrupted supplies will impact downstream manufacturing, leading almost inevitably to price increases for both domestic and foreign products. Steel is also widely used for renewable energy applications such as wind turbines and electric vehicles; higher prices and added strain on the supply chain could, therefore, make the energy transition more expensive in the EU than elsewhere.
Learn more: Implications of the CBAM for the iron and steel sector
Indian steel mills face greatest CBAM risk: Goldman Sachs
Investment bank Goldman Sachs Group says in a report that Indian steel producers are the most at risk from Europe’s carbon plan, the Carbon Border Adjustment Mechanism (CBAM), Kallanish notes.
This is due to two main factors: steel producers from India registering high sales to the European market, and Indian steel mills having an elevated emissions intensity. This puts them at more risk for carbon tax-related import charges.
In January, India was the largest HRC exporter to Italy, with shipments reaching 192,152 tonnes, according to data from Cybex.
According to the Goldman report by analysts led by Emma Jones, Indian steel mills could face an additional $102-190/tonne of carbon import tax charges on flows of Indian steel to the bloc over the next decade. This additional charge would account for 15-28% of current hot rolled coil prices, and assumes a carbon price of $70/t.
The CBAM carbon plan aims to levy charges on imported goods entering the European Union (EU), for certain energy-intensive sectors such as steel, to encourage cleaner pollution standards at its trading partners. The carbon tax will come into effect on 1 January 2026. The move has been met with strong criticism from overseas producers, including Russia and China.
The analysts say: “Indian steel producers operate at a carbon intensity level well above the EU and global level, potentially exposing them to elevated charges,” as they rely mainly on coal-based processes.
The report notes that, among the producers, Tata Steel and JSW Steel have the most direct exposure to the EU.
Indian mills have also been outspoken about the potential impact of this tax, likening it to a trade barrier. The Indian government is currently in discussions with the EU, in order to reach an agreement for concessions.
Suhita Poddar India