India sends a large volume of steel and aluminium to Europe, which makes these two sectors the front line of CBAM’s impact on Indian industry. If you export either, CBAM affects you more directly than almost any other exporter. This guide explains why these metals are hit hardest, what the coal-power challenge means, and the practical steps that can protect and even grow your European market share.
Why steel and aluminium are hit hardest
Both metals are carbon-intensive to produce, and in India that intensity is amplified because a large share of electricity still comes from coal. CBAM prices exactly this kind of carbon, so Indian steel and aluminium tend to carry higher embedded emissions than the same products made in regions with cleaner power grids. That emissions gap is precisely what CBAM converts into a cost at the European border.
In other words, it is not that Indian producers are careless – many are highly efficient. It is that the electricity powering their plants carries a heavy carbon load, and CBAM looks straight through the product to the energy behind it.
The coal-power challenge explained
For many Indian metal producers, a large portion of their embedded emissions comes not from their own furnaces but from the coal-based grid electricity they consume. Aluminium is the clearest example: smelting aluminium requires enormous amounts of electricity, so if that power is coal-heavy, the product’s footprint climbs sharply regardless of how well the plant itself is run.
This is partly a structural issue – no single producer controls the national grid. But it is not a dead end. Producers can reduce their exposure through several routes: sourcing renewable or captive clean power, improving energy efficiency to use less electricity per tonne, and in some cases shifting to lower-emission production methods over time. Each of these directly lowers the number CBAM cares about.
The competitiveness question
Here is the uncomfortable truth exporters must confront. An Indian producer and a competitor from a cleaner-energy country can offer the same steel or aluminium at the same price – but under CBAM, the cleaner one is effectively cheaper for the European buyer, because their goods carry a smaller carbon cost. Over time, this quietly shifts orders toward lower-emission suppliers.
Exporters who ignore this risk watching their European market share erode without ever losing on price or quality in the traditional sense. Those who act on it – by measuring, reducing, and documenting their emissions – can defend their position and, in many cases, win business from less-prepared rivals. CBAM does not just add a cost; it rearranges who is competitive.
A worked illustration
Picture two suppliers quoting the same German buyer at the same price per tonne. Supplier A, using a share of renewable power, has verified emissions of 1.8 tonnes of carbon per tonne of aluminium. Supplier B, on full coal power with no verified data, is assigned a default of 2.5 tonnes. On a 400-tonne order, Supplier A’s goods carry 720 tonnes of embedded carbon; Supplier B’s carry 1,000 tonnes. At an effective carbon price of 70 euros per tonne, that is roughly 50,400 euros of carbon cost for A versus 70,000 for B – a 19,600-euro gap on one order. Same metal, same price, but A is now clearly the cheaper choice for the buyer.
What Indian steel and aluminium exporters can do
- Measure your true emissions now, so you know exactly where you stand rather than being assigned high EU defaults.
- Identify your biggest emission sources – usually electricity – and target those first.
- Explore cleaner power, whether through renewable sourcing, captive generation, or power purchase arrangements.
- Improve energy efficiency to reduce electricity used per tonne of product.
- Build a verified emissions data package that reassures buyers you are on top of CBAM.
A challenge, but also an opportunity
It helps to reframe CBAM. Yes, it is a real challenge for carbon-heavy metal exporters, and pretending otherwise would be dishonest. But it also rewards the Indian producers who move early on cleaner production and transparent data. In a decarbonising world, being the demonstrably low-carbon Indian steel or aluminium supplier is not merely compliance – it is a genuine and durable business advantage that competitors will struggle to match once you have built it.
Practical routes to cleaner power
Since electricity is so often the biggest contributor for Indian metal producers, it is worth knowing the concrete options. Renewable power purchase agreements let a producer contract directly for solar or wind electricity, sometimes at competitive rates. Captive or group-captive renewable generation – building or investing in a dedicated clean plant – can secure long-term low-carbon supply. Rooftop solar can offset a portion of daytime consumption. And energy-efficiency projects, from waste-heat recovery to better motors and process controls, reduce the amount of electricity needed per tonne in the first place. Not every option suits every plant, but most producers have at least one viable lever – and each one directly lowers the CBAM footprint.
Frequently asked questions
Why are Indian steel and aluminium most affected by CBAM?
Because both are carbon-intensive and, in India, are often produced using coal-based electricity, giving them higher embedded emissions than equivalents made with cleaner power – exactly what CBAM charges for.
Can Indian exporters reduce their CBAM exposure?
Yes. Sourcing cleaner power, improving energy efficiency, and providing verified actual emissions data (instead of high defaults) can all meaningfully lower the CBAM cost on their goods.
Does CBAM make Indian metals uncompetitive in Europe?
Not necessarily. It disadvantages high-emission, poorly documented producers, but exporters who reduce and verify their emissions can stay competitive and win share from unprepared rivals.
The bottom line
Steel and aluminium are India’s most CBAM-exposed exports, largely because of coal-based power. The exporters who measure, reduce, and document their emissions now will be the ones who keep their European customers – and CBAM, handled well, becomes a way to stand out rather than a reason to fall behind.
