CBAM explained: what the EU carbon border tax means for Indian exporters right now

If you export steel, aluminium, cement or fertiliser to Europe, four letters now sit between you and your customer. CBAM, the EU's Carbon Border Adjustment Mechanism, charges for the carbon embedded in certain imports. This week it was in the news on three fronts at once, so it is a good moment for a plain explainer.

The rules in one breath

According to Earth5R's free CBAM guide for Indian exporters, which compiles the EU regulations, the mechanism covers cement, iron and steel, aluminium, fertilisers, hydrogen and electricity. The EU importer pays, as an authorised CBAM declarant. Certificates go on sale from 1 February 2027, and the first annual declaration, for 2026 imports, is due by 30 September 2027. The 2026 certificate price is the quarterly average of EU carbon auctions, €75.36 a tonne in the first quarter and €75.28 in the second.

The bit that should worry exporters is data. Importers can use actual emissions verified by an accredited verifier, or EU default values with a mark-up of 10% in 2026, 20% in 2027 and 30% from 2028. The guide notes that the default value for Indian hot rolled flat steel is 4.28 tonnes of CO2e per tonne before the mark-up, against an Indian crude steel average of 2.55. Bad data, in short, is a tax on itself.

Delhi offers to pick up the bill for MSMEs

The government will fully fund certification costs for MSME exporters under the Export Promotion Mission, including costs linked to CBAM and the EU deforestation rules, commerce minister Piyush Goyal said in Berlin, Moneycontrol reported. For others, he said, support will come "in a graded way". For a small forging unit in Ludhiana, that could make the difference between verified data and the expensive default.

The minister also went on the offensive. At the Berlin Global Dialogue he argued that CBAM and high steel duties could raise living costs and make industries uncompetitive, and said India supports 17% of the world's population while contributing less than 3% of carbon emissions, NDTV reported. Expect that argument to be loud at COP31.

Europe wants a wider net

On the other side, EUROMETAL joined 19 European industry associations and the industriALL union in calling for CBAM to cover downstream products, ahead of negotiations among the Parliament, Council and Commission. Their worry is that products left out could be replaced by imports. For Indian exporters of finished goods made from steel or aluminium, that is the clause to watch.

Brussels is also tinkering with its own carbon market. The Parliament's environment committee backed about 99 million extra free allowances for some industrial plants from 2026 to 2030, against about 121 million favoured by member states, Carbon Credits reported. Free allowances matter because the CBAM bill is worked out against what EU producers still get free.

Prices may rise this winter

BofA Global Research said EU carbon prices could rise to €100 a tonne this winter, as high gas prices linked to the Iran war push power generators towards coal, LatestLY reported citing ANI. Since CBAM certificates track EU auction prices, a higher carbon price means a bigger bill for every tonne of unverified emissions.

And Britain is next

The UK's own carbon border mechanism starts in 2027, and edie warns businesses will need precise emissions data from suppliers built into procurement and contract terms. One measurement system, two customers.

India's own carbon price

At home, baselines and targets have been notified for seven energy intensive sectors covering roughly 490 emitters under the Carbon Credit Trading Scheme, Carbon Copy reported. A credible domestic price matters because CBAM deducts carbon price already paid. Get that right and money stays in India.

What exporters should do this quarter

Start measuring at installation level now. Ask your EU buyers what data they need and put it in the contract. Apply for the MSME support once the scheme details are out. And train the people who will actually collect the numbers. Earth5R's corporate sustainability training is mapped to BRSR, which helps when the same data feeds both reports. CBAM is a price problem dressed up as paperwork. Treat it that way and it becomes manageable.