Is the new EU-India Strategic Agenda a victory for decarbonizing steel?

The European Union’s new strategic agenda with India signals intent to collaborate on clean industry and low-carbon steel but lacks depth where it matters the most.

By Colette van der Ven and Sanvid Tuljapurkar

This article was first published by the Economic Times Prime on 9 October 2025. This research is part of an ongoing project at TULIP Consulting focused on decarbonizing Indian steel and the role of trade.

Last month, the European Union (EU) unveiled its New Strategic EU-India Agenda, outlining a vision to enhance cooperation between India and the EU on trade, technology, security and defense, and climate. The strategic agenda, set against the backdrop of ongoing EU-India free trade agreement (FTA) negotiations, lays the groundwork for a Joint EU-India Comprehensive Strategic Agenda to be adopted at the EU-India leaders’ summit in early 2026.

Seeking to advance a clean transition, the agenda explicitly mentions the possibility of cooperation “to accelerate the decarbonization of heavy industry, particularly by developing low-carbon steel and cement in India”, and highlights enhanced areas of cooperation around the EU’s Carbon Border Adjustment Mechanism (CBAM). While this is a step in the right direction, the agenda falls short of including meaningful cooperation provisions on CBAM. It also fails to adequately address supply-side constraints to developing low-carbon steel in India.

Decarbonising steel is a priority in India

India’s steel sector is highly emission-intensive, about 30% above the global average. It also contributes 10-12%  to India’s total carbon emissions. As Indian steel production is projected to double by 2030 (compared to a 2019 baseline), decarbonizing the sector is critical.

Recently adopted initiatives, including the Green Steel Roadmap and Action Plan, as well as India’s Green Steel Taxonomy, highlight the government’s commitment to decarbonizing the steel sector.  India’s Carbon Credit Trading Scheme (CCTS), a baseline-and-credit scheme launched in 2023, is also rapidly advancing, with targets for covered steel producers published in June 2025.

Limited meaningful references to CBAM

The New Strategic EU-India Agenda highlights strengthened EU-India cooperation on CBAM, which, as of January 1, 2026, will require EU importers to pay for embedded carbon emissions in iron and steel, aluminum, cement, fertilizer, hydrogen, and electricity. With a quarter of all Indian steel exports destined to the EU, the impact will be substantial. For the steel industry, CBAM is projected to add USD55-USD65 per million tonnes between 2026 and 2029, rising to USD90-USD145 per million tonnes between 2030 and 2034 (approximately 9%-22% of domestic steel prices). Not all firms will be equally affected: based on TULIP Consulting's ongoing research, CBAM’s impact on integrated steel producers will be marginal, whereas SMEs, which comprise 40% of crude steel production in India and dominate the secondary steel sector, will be highly affected.  

The agenda identifies possibilities to minimise India’s CBAM exposure. It references India’s CCTS and highlights that the EU could share lessons learned from developing its Emissions Trading Scheme (ETS) in monitoring, reporting, and verification (MRV) as well as the development of sectoral benchmarks. It further reiterates that a carbon price effectively paid will be deducted from the CBAM financial adjustment, and notes that simplifications are being developed for SMEs.

These references, while a step in the right direction, fall short of meaningfully deepening EU-India cooperation around CBAM. While it references CCTS, it does not, despite India’s request, officially acknowledge that the carbon price Indian firms have effectively paid under the CCTS can be deducted from CBAM costs. Additional clarity on what constitutes an “effectively paid” carbon price under CBAM will come only with the adoption of additional rules, which are planned to be introduced in the first quarter of 2026. And while technical support from the EU on MRV, as highlighted in the agenda, would be welcome, a more effective way to strengthen the linkages between the CCTS and CBAM could be achieved by developing mutual recognition of MRV systems, including through an EU-India alignment task force.

Moreover, the reference to simplification procedures for SMEs appears to be linked to the ongoing simplification agenda that exempts firms that import less than 50 tonnes per year cumulatively from CBAM requirements. It does not indicate additional exemptions or transition periods for India-based SMEs to mitigate their CBAM burden. Telling is the EU’s approach in the August 2025 EU-United States (US) Joint Statement, which promised additional flexibility for SMEs from the US under CBAM. However, the EU has subsequently clarified that this statement refers to the ongoing simplification agenda and does not suggest an additional carve-out for US SMEs.

Cursory reference to green labelling

The New Strategic EU-India Agenda also highlights product labelling schemes as a tool to help scale up green steel markets. Currently, the EU is developing various green steel labelling initiatives, including under the Industrial Decarbonization Accelerator Act and the Ecodesign for Sustainable Products Regulation.

These initiatives could create further incentives for steel decarbonisation in India, as qualifying firms can gain preferential access to EU firms required to meet low-carbon steel requirements. At the same time, it risks creating additional barriers to trade in steel products that do not fall within the EU’s definitions and thus cannot access the premium market. It also raises questions about linkages – or the lack thereof – to India’s green steel taxonomy. Moreover, the ESPR’s requirement for steel products to be accompanied by a digital product passport could constitute a trade barrier, especially for SMEs.

While low-carbon labelling schemes in the EU are still being developed, the agenda creates alignment possibilities for EU-India cooperation. Cooperation on these matters, including through targeted technical assistance on digital product passports for steel, must be included in future EU-India cooperation priorities.

Insufficient focus on supply-side obstacles

EU demand-side tools like CBAM and labelling requirements, which are the focus of the new EU-India Strategic Agenda, are insufficient levers to decarbonise India’s steel sector.  Supply-side constraints to decarbonizing Indian steel must be addressed. These include high levels of coal use, old furnaces, limited availability of scrap, low-quality iron ore, lack of natural gas, a high number of SMEs, and limited access to emerging technologies. Tackling these challenges is crucial, especially since India exports only about 6% of its steel production.

A meaningful EU-India partnership must, therefore, address India’s technology gap via technology transfer and co-development of emerging low-carbon steel technologies. The EU’s leadership in hydrogen-based direct reduced iron (DRI) and the fact that it is home to over half of near-zero emissions steel projects that have been announced, provide a strong basis for such collaboration.  

While the agenda refers to the EU-India Task Force on Green Hydrogen, it does not emphasise cooperation around hydrogen-based DRI and other emerging low-carbon steel technologies. The lack of concrete results from existing steel technology-sharing initiatives, such as the India-Sweden Industry Transition Partnership under LeadIT, further highlights the importance of increasing cooperation on emerging technologies for low-carbon steel. Such cooperation should also address structural barriers to the implementation of technologies by making blended finance available to provide concessional loans and guarantees.

EU-India cooperation priorities must further address EU trade restrictions on scrap steel exports to non-OECD countries, as part of the New EU Waste Shipment Regulation. Increased scrap usage is a low-hanging fruit for reducing emissions and CBAM costs, especially for SMEs that predominantly use the induction furnace production route and lack the financial and technological resources to adopt advanced abatement technologies. Export restrictions on scrap, such as those adopted by the EU, limit Indian firms’ ability to decarbonize, given that India imports 25% of its scrap. 

Towards a dedicated EU-India Green Steel Partnership  

India must consider strengthening demand-side cooperation provisions while adding the missing supply-side elements as it negotiates with the EU towards a more comprehensive agenda. One idea is to include, as part of the agenda, the development of a dedicated EU-India Green Steel Partnership, which could fall under the EU-India Trade and Technology Council (TTC), and be used to coordinate financing, technology transfer, CBAM-related issues, SMEs, mutual recognition of MRV, scrap steel trade restrictions, and green steel labelling and standards.

Another option is to develop a steel-specific platform as part of the EU-India FTA negotiations, similar to the Protocol on Palm Oil that was included in the recently concluded EU-Indonesia FTA negotiations, which envisions establishing a platform for dialogue and creating a framework for closer collaboration on palm sustainability and trade in palm products. Given the importance of decarbonising Indian steel – both for climate and competitiveness – and the critical role of the EU, developing a dedicated EU-India Green Steel Partnership would be imperative.