New Delhi – The European Union’s carbon border levy stopped being a reporting exercise on 1 January 2026, and Indian exporters of steel and aluminium are already absorbing the cost in lost volume rather than in certificate payments.
The Carbon Border Adjustment Mechanism entered its definitive phase at the start of the year. Importers into the EU must now buy certificates priced against the bloc’s Emissions Trading System. The first annual declaration covering 2026 imports, together with the surrender of certificates, falls due on 30 September 2027.
The default value trap
The mechanism’s sharpest edge for Indian suppliers is not the carbon price. It is what happens when a producer cannot evidence its own emissions.
Where verified installation-level data is absent, the EU applies default values. Those defaults are punitive by design, and analysts put them well above what an efficient Indian plant actually emits. A producer with genuinely competitive emissions intensity but no verified data is charged as though it were among the dirtiest in its category.
The remedy is unglamorous and slow. It requires plant-level measurement, product-level allocation of emissions, and third-party verification at the installation. None of that can be assembled in the weeks before a shipment.
Buyers moved before the rules did
The volume effect arrived ahead of the compliance deadline. Indian iron and steel exports to the EU have fallen by roughly a third, and aluminium exports by double digits, as European buyers priced in the coming carbon cost and pressed for firmer emissions data before committing.
That is the part Indian exporters most often misjudge. The regulation binds the importer, not the exporter. But the importer simply moves to a supplier who can hand over verified numbers, and the Indian producer loses the order without ever receiving a notice.
Margin, not just access
Where relationships hold, the cost reappears as price. Trade researchers estimate Indian exporters may need to concede reductions in the mid to high teens as a percentage, and in some cases above twenty per cent, to keep European buyers whole once certificate costs are fully passed through.
For commodity grades running on thin margins, a concession of that order is the difference between a viable export line and an abandoned one.
The domestic argument
There is a live policy debate about whether India should capture this revenue at home. A domestic carbon price paid in India can, in principle, be set against the EU obligation, keeping the money inside the Indian system rather than transferring it to the European exchequer. That is one of the arguments advanced for accelerating the Carbon Credit Trading Scheme.
Whether the two regimes will be treated as equivalent is unresolved, and it is the single question Indian exporters should be tracking most closely this year.
Source: European Commission CBAM implementation schedule and published certificate pricing, with export volume and pricing estimates drawn from trade research published in 2026.
