The CBAM and beyond: Leveraging EU-India trade cooperation to decarbonise Indian steel
Perspectives on the European Union’s Carbon Border Adjustment Mechanism (CBAM) remain deeply polarised. While the EU frames CBAM as a central tool for achieving its climate objectives, many developing countries, including India, view it as economically burdensome, potentially protectionist, and misaligned with the principles of climate justice.
While this debate is important, this report seeks to move beyond normative CBAM discussions by introducing an empirical analysis of CBAM’s impact on EU steel producers. Based on 80+ interviews conducted with Indian stakeholders, it finds that the effects of CBAM are highly uneven across firms. Large integrated steel producers are well-positioned to minimize CBAM costs, while small and medium enterprises, which comprise over 40% of Indian steelmaking, will be heavily affected, creating the risk of a green divide within India.
These findings add additional complexity to the dominant CBAM narratives, highlighting the need for a more granular understanding of how climate-trade measures interact with domestic industrial realities.
The report further analyses the impact of the EU’s evolving regulatory landscape on steel competitiveness. A growing set of measures, including the forthcoming tariff-rate quota on steel, low-carbon steel standards, and supply chain transparency requirements, creates cumulative pressures on the competitiveness of Indian firms that extend well beyond CBAM.
From a climate lens, the report further highlights the importance of anchoring EU-India cooperation around India’s steel decarbonization challenges as the starting point. It identifies opportunities for a more strategic EU-India green steel partnership, grounded in shared interests and complementary strengths. Key areas of strengthened cooperation include technology co-development, financial de-risking, investment mobilization, and regulatory cooperation.
Ultimately, the report makes the case for a more integrated approach to trade and climate policy–one that aligns decarbonization objectives with industrial development and positions EU-India cooperation as a driver of sustainable transformation in one of the world’s most emissions-intensive sectors.
This policy brief has received considerable media attention, including from the Financial Times’ Sustainable Views and EuroMetal.
