Here’s the reality check that a lot of Indian exporters are still avoiding: the EU’s Carbon Border Adjustment Mechanism isn’t something coming in the future. The transitional phase started in October 2023. The full financial obligation — where EU importers actually start buying and surrendering CBAM certificates for your products — kicks in from January 1, 2026.
That date isn’t soft. It’s not subject to further delay discussions. And if your company exports steel, aluminum, cement, fertilizers, or hydrogen to the European Union and you haven’t started building the product-level carbon footprint data that CBAM requires, you’re already behind.
This blog is not about panicking. It’s about understanding what the mechanism actually requires, which Indian sectors are most exposed, and what practical steps look like from here.
The Mechanics of CBAM, Simply Put
CBAM is essentially a carbon cost imposed at the EU border. European manufacturers pay for their emissions under the EU Emissions Trading System (EU ETS). CBAM extends that cost to imports, preventing a situation where EU producers get undercut by competitors from countries with weaker or no carbon pricing. The EU calls this ‘preventing carbon leakage.’
The way it works: EU importers of covered goods must purchase CBAM certificates corresponding to the embedded carbon in what they’re importing. The price of those certificates tracks the EU ETS carbon price. The EU ETS has been ranging between €65 and €85 per tonne in recent months — meaningful money when you’re dealing in large tonnages.
For Indian exporters, the key number is the embedded emissions in your product — expressed as tonnes of CO2 per tonne of goods exported. If that figure is high relative to what European producers emit, your EU buyers face a significant additional cost. Which they’ll pass back to you over time.
A 2024 research study by the Foundation for European Progressive Studies (FEPS) and India’s National Institute for Public Finance and Policy (NIPFP) quantified this sharply. It found that India could face a duty of approximately €173.8 per tonne on steel exports to the EU when CBAM is fully operational — equivalent to 16% of the unit export value. You can find the paper cited in a detailed Mongabay India analysis of CBAM’s steel sector impact, which also quotes Columbia University researchers on why India’s exposure is disproportionately high.
Which Indian Sectors Are Most Exposed
Steel is the biggest concern, and the numbers explain why. India is the world’s second-largest crude steel producer, with output of 152 million tonnes in 2024. A large chunk of India’s steel is produced via blast furnace and basic oxygen furnace routes — processes that are significantly more carbon-intensive than the electric arc furnace production that dominates in Europe.
India’s average steel emission intensity is around 2.5 tonnes of CO2 per tonne of steel produced, according to government data cited by S&P Global. The EU average sits at roughly 1.5 to 1.8 tonnes. That 0.7 to 1.0 tonne gap translates directly into CBAM certificate costs for every tonne exported. India’s Steel Secretary acknowledged this plainly at the Financial Times Energy Transition Summit in Delhi, saying that CBAM will ‘definitely impact’ Indian steel exports given the dominance of the blast furnace route in Indian production.
Aluminum is similarly exposed, especially primary production. Grid emission intensity matters enormously here, and India’s coal-heavy grid pushes up indirect emission factors for electricity-intensive processes. Fertilizer manufacturers exporting to Europe face CBAM on nitrogen-based products, where embedded emissions from natural gas used as feedstock get counted. Cement exports are smaller in volume but face the same calculation.
The Centre for Science and Environment (CSE) estimated that CBAM could impose the equivalent of a 25% additional tax on India’s covered goods exported to the EU. A Chatham House study on CBAM exposure ranked India among the top 8 most-affected countries globally — and with base metals and articles making up roughly 9.6% of India’s total EU exports, that’s not a niche issue.
Why Default Values Are Your Enemy
During the transitional phase (October 2023 through December 2025), EU importers are required to report embedded emissions quarterly. No certificate purchases yet — but this is where data quality becomes commercially critical.
If your EU buyer can’t report your actual emissions because you haven’t provided verified data, they fall back on default values set by the European Commission. Those defaults are calculated conservatively. They’re deliberately set higher than the actual performance of most producers, specifically to incentivize actual measurement.
What that means in practice: an Indian steel exporter that hasn’t provided facility-level emissions data will have their product assessed at a higher embedded carbon figure than their real performance warrants. Their EU buyer pays more for CBAM certificates than necessary. And that extra cost will come back to you in negotiations as price pressure or lost orders.
Companies that got verified emissions data into their EU buyers’ hands during the transitional phase are already in a stronger commercial position for 2026. The ones that waited are playing catch-up.
The Supply Chain Layer Most Companies Miss
One thing that catches a lot of manufacturers off guard: CBAM captures embedded emissions throughout the production process, not just at your facility gate. Upstream supply chain emissions count too.
For a steel producer, that means emissions from coking coal processing and iron ore reduction — not just the energy your own facility consumed. For fertilizer, it includes the natural gas used as feedstock in ammonia synthesis. For aluminum, the electricity mix at every stage of the process matters, as does the anode production pathway.
This is where sustainable supply chain management stops being a CSR initiative and becomes a direct commercial factor. The emission intensity of your upstream suppliers feeds into your CBAM exposure. And under SEBI’s updated BRSR requirements for top 250 listed companies, you’re simultaneously building Scope 3 and value chain emissions data for domestic disclosure. These aren’t separate work streams — they’re the same data problem.
Indian companies that have started systematic supply chain emissions audits are finding things they didn’t expect: raw material suppliers with no monitoring infrastructure, transport legs with surprisingly high emission profiles, process steps where low-carbon alternatives exist but have never been costed. Finding these things now, before 2026 financial obligations crystallize, is a lot better than finding them in a price negotiation.
What Verification Actually Requires
From 2026 onward, the embedded emissions you report to EU importers need accredited third-party verification for the data to be accepted under CBAM’s formal rules. Verification bodies follow specific EU implementing regulations on calculation methodology — covering direct emissions from combustion and processes at your facility, plus indirect emissions from electricity consumption.
Our GHG Accounting services cover exactly these calculations: Scope 1 (direct combustion and process emissions), Scope 2 (purchased electricity using actual or supplier-specific grid emission factors), and for CBAM purposes, the precursor emissions from upstream chemical inputs in products like fertilizers.
Building verification-ready data infrastructure takes time. Companies that started 12 months ago are now running through trial verifications and finding data gaps. Companies starting now have a tighter runway — but it’s still workable with focused effort.
Practical Steps from Here
A CBAM exposure assessment is the right starting point. Map exactly which product lines go to EU customers, calculate approximate embedded emissions using available data, and run the numbers against EU ETS price scenarios. That exercise tells you your financial exposure and how urgently you need to move.
From there, the work falls into three streams. Data infrastructure: establish facility-level metering and monitoring that supports the required calculation methodology. This isn’t always a massive capital investment, but it requires systematic planning and it can’t be retrofitted in a hurry.
Supply chain engagement: identify which upstream suppliers’ emissions feed into your product’s CBAM calculation. Start the data-sharing conversations now — most Indian MSMEs don’t have ESG reporting infrastructure, and giving them a clear template and enough lead time makes this tractable. Our Supply Chain Sustainability Assessment case study shows how this looks in practice for a manufacturer working across a large supplier base.
Verification readiness: understand what accredited third-party verification requires, map it against your current data quality, and run a trial assessment before 2026 pressure builds. The verification bodies have limited capacity, and companies that leave this to the last quarter will find themselves queuing.
CBAM as a Competitive Opportunity — Not Just a Burden
There’s a version of this story that’s not about compliance cost. If you can demonstrate a genuinely lower emission intensity than your competitors — other Indian producers or other Asian exporters — that’s a commercial differentiator in a European market where buyers are increasingly scrutinizing the carbon profile of what they purchase.
India has made real progress on steel emission intensity: from 3.1 tonnes per tonne of crude steel in 2005 to 2.5 tonnes in 2022, according to government data. The gap with Europe hasn’t closed, but the trajectory matters. Companies that can show verified improvement — supported by credible Sustainability and Climate Change strategy rather than just compliance paperwork — are building a position that pays off in multiple ways: CBAM cost reduction, access to green financing, and stronger relationships with European buyers who have their own decarbonization commitments to meet.
It’s also worth reading our related blog on India’s ESG compliance landscape in 2025 — particularly the section on how BRSR Scope 3 reporting and CBAM data requirements overlap. Building one infrastructure serves both.
What Bilancia Can Help With
We work with Indian manufacturers on CBAM exposure assessment, facility-level GHG calculation and verification readiness, supply chain emissions mapping, and integration with India’s domestic BRSR and CCTS compliance requirements. Our Sustainability Reporting & Disclosure services and Low Carbon Solutions team have built experience across steel, chemicals, and industrial goods sectors — working with companies that need to satisfy Indian regulatory requirements and international trade compliance at the same time.
January 2026 is closer than the calendar makes it feel when you factor in the time to build systems, engage suppliers, run assessments, and go through verification. If you haven’t done a CBAM exposure analysis yet, that’s the right place to start. Reach us at general@bilanciaconsulting.co.in or call +91-9510144494.
References & Further Reading
- FEPS & NIPFP (2024) — ‘Evaluating the Impact of CBAM on Developing Countries’ (cited in Mongabay India analysis of Indian steel sector) — mongabay.com/india
- S&P Global Commodity Insights (2025) — ‘CBAM to Have Larger Impact on Indian Exports, Not US Tariffs: India Steel Secretary’ — spglobal.com
- Centre for Science and Environment / ACR Journal (2024) — ‘CBAM and Its Impact on India’ (25% additional cost estimate on covered goods) — acr-journal.com
- Lexology / Cyril Amarchand Mangaldas (2023) — ‘EU’s Carbon Border Adjustment Mechanism and Its Impact on Indian Businesses’ (Chatham House exposure ranking, $8bn steel/aluminium exposure figure) — lexology.com
- Columbia University CGEP / Eco-Business (2024) — Senior Research Associate Shayak Sengupta on disproportionate CBAM impact on Indian steel due to export concentration and emission intensity — eco-business.com