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 to achieve its climate objectives, many developing countries, including India, view it as economically burdensome, potentially protectionist, and misaligned with principles of climate justice. This tension is increasingly reflected in EU–India trade relations, where CBAM has become a key point of contention.

This report moves beyond this binary debate by examining the differentiated impact of CBAM on India’s steel sector. It shows that the effects of the mechanism are highly uneven across firms, depending on emissions intensity, production processes, and compliance capacity. In doing so, it challenges dominant narratives and highlights the need for a more granular understanding of how climate-trade measures interact with domestic industrial realities.

Importantly, the report situates CBAM within a broader and evolving EU regulatory landscape. A growing set of measures, including sustainability standards, trade defence instruments, and product transparency requirements, will shape market access conditions for Indian steel exporters. Taken together, these developments risk creating cumulative pressures on competitiveness that extend well beyond CBAM alone.

Against this backdrop, the report argues for a shift in focus—from market access concerns to the structural challenges of decarbonising India’s steel sector. It identifies opportunities for a more strategic EU–India partnership, grounded in shared interests and complementary strengths. Key areas include technology co-development, investment mobilisation, financial de-risking, and regulatory cooperation, as well as emerging value chains such as green hydrogen.

Drawing on extensive empirical research, including over 80 stakeholder interviews, the report bridges the gap between high-level policy debates and on-the-ground industrial dynamics. It emphasises that effective cooperation must be rooted in the realities of India’s steel sector; its diversity, constraints, and transition pathways.

Ultimately, the report makes the case for a more integrated approach to trade and climate policy–one that aligns decarbonisation 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.