India is preparing targeted policy support for its steel industry as Europe’s carbon border tax reshapes global trade in emissions-intensive goods. The European Union’s Carbon Border Adjustment Mechanism (CBAM), which applies carbon costs on imports like steel, is exerting significant pressure on export economics and trade flows, particularly for major exporting nations.

European demand accounts for roughly two-thirds of India’s steel exports, exposing domestic mills to carbon pricing and regulatory headwinds that go beyond tariff reductions. Senior officials acknowledge that even after a recently negotiated trade agreement between India and the EU, structural challenges tied to carbon levies, quotas, and compliance burdens will persist.

In response, New Delhi is signaling policy intervention to support steelmakers navigating these pressures, as producers increasingly pivot toward alternative markets in Africa and the Middle East. The shift reflects a broader geopolitical realignment in carbon-linked trade and highlights ongoing tensions between environmental policy instruments and global competitiveness.