CBAM and Indian Steel: The Market Is Already Deciding Winners and Losers

I've spent the past few months chatting with CEOs and sustainability heads of India's largest steel exporters. And let me tell you: every single conversation comes back to CBAM. The EU's Carbon Border Adjustment Mechanism isn't keeping executives up at night because it's coming. It's because it's already here.

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The Differentiation Has Already Begun

Here's what most people don't realize: the market is already splitting Indian steel exporters into winners and losers. If you're a low-emission producer, your export volumes to the EU are stable or growing, you're commanding 2-3% price premiums, and EU buyers are calling you. But if you're a high-emission producer, you're facing 9% price drops according to a European Commission study, commercial pressure is mounting fast, and market share is eroding.

This isn't a forecast. This is happening right now. EU buyers aren't waiting for 2027 to start caring about carbon. They're already baking emission intensity into procurement decisions and pricing negotiations. The commercial dynamics have shifted, and the gap between leaders and laggards is widening every quarter.

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Go further: Use CO2 AI’s CBAM Calculator to calculate your customized cost analysis based on the EU Carbon Border Adjustment Mechanism.

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Why India Has the Most to Lose

By 2032, Indian steel exporters will face a 32% cost increase under CBAM, the steepest globally according to BCG analysis. The emissions gap is real and quantifiable. The EU benchmark for blast furnace steel sits at roughly 1.37 tCO₂ per tonne, while typical Indian installations run at about 2.1 tCO₂ per tonne. That 0.73 tCO₂ gap translates directly into costs.

With proper verification, that's a CBAM cost of roughly €65-70 per tonne for hot rolled coil and downstream products. But here's the scary part: without airtight verification, EU authorities will apply default values—and your CBAM burden jumps to €250-300 per tonne. That's not a cost increase you can absorb or pass through. That's a market exit.

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Not All Steel Is Created Equal

The impact varies wildly depending on what you produce, and this is where strategy gets interesting. For high-risk products like cold rolled coil annealed, 95% of India's exports go to Europe. Coated steel products like galvanized and value-added materials see 80% of shipments serving EU markets. These products command massive premiums in Europe that you simply cannot replicate in Asian markets. If you're in downstream flat steel, you're feeling the heat right now.

Lower-risk products have more flexibility. About 50% of India's hot rolled coil and plate exports target Europe, with only a ~$30 per tonne price gap between EU and Asian markets. For these producers, pivoting to Asia is economically viable if EU economics don't work. But that option doesn't exist for downstream players who've built their entire business model around European demand.

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The Verification Game No One's Talking About

Here's a truth that doesn't get enough attention: your actual emissions matter less than your ability to prove them. I know that sounds backwards, but it's the reality we're living in.

As Swaroop Banerjee from JSW Steel put it during a recent webinar: "Indian mills are largely capable of generating verified emissions data, but EU buyers remain cautious as audit rules evolve." Even if you've done the hard work to reduce emissions, if you can't verify them to EU standards with EU-accredited auditors, you're treated as high-emission. Period.

And verification capacity is becoming a serious bottleneck. Only auditors accredited by EU-recognized bodies can conduct CBAM verification, and they're in short supply. The timeline to get audited is growing longer. First movers on verification will have a massive advantage—not just in compliance, but in commercial negotiations with European buyers who need credible data today.

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India's Unique Challenges

The Indian steel sector faces constraints that most developed markets simply don't have. There are over 1,091 crude steel producers plus 1,200+ re-rollers using vastly different technologies, from blast furnace-BOF to coal-DRI to EAF. This heterogeneity makes uniform decarbonization strategies nearly impossible.

Blast furnace assets make up 43% of production, with an average age of just 18 years. These facilities have decades of operational life left, creating significant emission inertia and technology lock-in. You can't just write off billions in relatively new capital equipment. The resource constraints are equally real: limited quality scrap for EAF expansion, insufficient high-grade iron ore needed for hydrogen-based DRI, scarce and expensive natural gas, and green hydrogen still sitting at a prohibitive $3-4 per kilogram.

India's electricity grid adds another layer of complexity. At roughly 50% fossil fuel-based generation and an emission intensity of 0.727 tCO₂ per MWh, it's higher than most Western grids. Even when you electrify processes, you're not getting the carbon benefit you would in markets with cleaner power.

These aren't excuses. They're the playing field. And smart operators are figuring out how to win anyway.

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What Leaders Are Doing Right Now

The forward-thinking companies I work with aren't paralyzed by these challenges. They're moving fast on verification readiness, partnering with accredited verifiers now rather than waiting for regulations to force their hand. They're building bulletproof emissions monitoring systems that can withstand EU scrutiny. The verification infrastructure you build today determines your market access tomorrow.

On the operational side, there's significant work happening on process improvements and waste heat recovery from existing operations. These optimizations might sound incremental, but the low-hanging fruit adds up fast. India's renewable energy capacity has reached 51.1% non-fossil fuel generation, and smart producers are capturing that through captive solar and wind installations plus green power purchase agreements. Some are testing natural gas for partial coal replacement in blast furnaces and exploring gas-based DRI where the economics work. JSW Steel is already running trials.

India's Ministry of Steel has set a clear target: 2.2 tCO₂ per tonne of crude steel by 2030—representing a 13.69% reduction from the 2023-24 baseline. Hitting that number requires the industry to boost DRI-EAF production from 7-9% to 18-20% of total output and grow scrap-based production from 10-12% to 25-27%. Alternate fuels like biomass, waste plastics, and syngas need to reach commercial scale.

Green hydrogen pilots are launching across the sector. JSW's 25MW green hydrogen facility at Vijayanagar is operational. CSIR-IMMT is running experimental vertical shaft furnaces. Carbon capture and utilization technologies are moving from laboratory curiosities to actual plant deployments. The technology pathway is becoming clearer even as the economics remain challenging.

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India's Green Steel Rating System and Carbon Market

India's Ministry of Steel has created a pragmatic framework that aligns domestic standards with international expectations. The star-rating system ranges from five-star green-rated steel at under 1.6 tCO₂e per tonne of finished steel down to below-threshold production above 2.2 tCO₂e. This creates a common language for domestic and international buyers while incentivizing continuous improvement.

The Carbon Credit Trading Scheme notified in June 2025 changes the economic equation in interesting ways. It covers 253 obligated entities in the iron and steel sector, with compliance starting in 2025-26 based on a 2023-24 baseline. Here's the opportunity: early movers who achieve lower emission intensities don't just avoid CBAM costs. They generate tradable credits in India's domestic carbon market. You can literally get paid for being ahead of the curve.

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The Long Game

India's commitment to Net Zero by 2070 requires transformation on a scale that's hard to grasp. We're talking about USD 1.2-1.3 trillion in investment, with production costs increasing 52-57% by 2070. But this isn't optional. The alternative, losing access to premium export markets and becoming globally uncompetitive, is far worse.

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Now What? Three Actions to Take This Quarter

The question isn't whether CBAM will affect you. It already is. What matters now is whether you can verify your emissions to EU standards today, not next year. How does your emission intensity stack up against competitors? What's your credible decarbonization roadmap for the next three, five, and ten years? Are you ahead of the curve, or playing catch-up? If you're serious about turning CBAM from threat to opportunity, here's where to start:

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1. Get Your Verification Infrastructure in Place. Now

Don't wait for the 2027 deadline. The companies winning today started building their verification capabilities 18 months ago. Identify and engage EU-accredited auditors immediately. Build robust emissions monitoring systems across your facilities—not just at plant level, but at process level. Your goal isn't just compliance; it's having data so credible that EU buyers use it as a competitive differentiator in your favor. The verification bottleneck is real, and the queue is getting longer. Book your auditor before your competitor does.

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2. Benchmark Your Emission Intensity Against Your Actual Competition

Stop comparing yourself to industry averages. That's not how the market works. Your EU buyers are comparing you to the other three suppliers they're evaluating, probably two from India, one from Korea. Get specific data on where you stand relative to direct competitors for each product line. If you're in the top quartile for emission intensity, make that a central part of your value proposition and start commanding premiums. If you're in the bottom quartile, you need a credible 24-month improvement plan, or you need to accept that certain EU markets are no longer viable for you. The middle? That's where the real battle is happening, and a 10-15% improvement in emission intensity could be the difference between growth and decline.

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3. Build Your Decarbonization Roadmap as a Commercial Tool, Not a Compliance Exercise

EU buyers don't want to see your 2070 Net Zero pledge. They want to know what your emission intensity will be in 2027, 2030, and 2032—with specific technology pathways, capex commitments, and interim milestones. Treat your decarbonization roadmap like you would a major product launch: cross-functional ownership, quarterly KPIs, board-level accountability. Then use it commercially. Share it with your key EU customers. Let them see that you're not just reacting to CBAM—you're staying ahead of it. The companies that make decarbonization a commercial advantage rather than a compliance burden are the ones that will own the premium segments of the EU market for the next decade.

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Let's Be Optimistic

Look, I'm not going to sugarcoat the challenges. CBAM is forcing painful adjustments across the Indian steel sector. But companies that act now, that invest in verification, build credible roadmaps, deploy next-gen technologies; won't just survive. They'll dominate.

They'll capture market share from high-emission competitors who moved too slowly. They'll command price premiums from quality-conscious EU buyers who need low-carbon steel. They'll become preferred suppliers in an increasingly carbon-conscious global market. The differentiation has already begun, and the window to turn this crisis into competitive advantage is open but it won't stay open forever.

The Indian steel companies I'm most excited about aren't the ones complaining about CBAM. They're the ones asking: "How do we use this to win?"

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