01
Your factory produces the goods
An Indian plant manufactures steel, aluminium, cement or fertilizer. CO₂ is released along the way — fuel, grid electricity, calcination and precursor inputs.
EU Regulation 2023/956 · India · 2026
What is CBAM?
CBAM is the EU's Carbon Border Adjustment Mechanism — a carbon price the EU applies to imported steel, aluminium, cement, fertilizers, hydrogen and electricity.
For an Indian exporter, CBAM means your EU buyer must pay for the CO₂ emitted while manufacturing your goods. File verified actual emissions and your buyer pays the real, lower number; file nothing and the EU applies punitive default values that cost 30 to 40 percent more.
The bottom line
“Every container that left this port last year is a CBAM filing this year.”
— Export ops, Mundra
CBAM at a glance
Six facts every Indian exporter should know first.
- Full form
- Carbon Border Adjustment Mechanism
- What it is
- An EU carbon tax on imported steel, aluminium, cement, fertilizers, hydrogen, electricity
- Who pays
- EU importers — but the cost lands on the exporter via pricing pressure
- Active since
- January 1, 2026 (definitive phase with financial payments)
- India impact
- ~18% of global CBAM cost; EU steel + aluminium exports fell 24.4% in FY25
- Regulation
- EU Regulation 2023/956
How it works
How CBAM works — factory to certificate, in four steps.
CBAM requires EU importers to purchase CBAM certificates for the CO₂ “embedded” in the goods they import, priced at the EU ETS auction rate (~€80 per tonne of CO₂). If the exporter can't provide verified data, the EU forces the buyer onto punitive default values — and the gap between defaults and actuals is the entire CBAM economics.
02
Embedded emissions are measured
Every tonne carries a CO₂ figure — Scope 1 + Scope 2 + precursors. This single number is what the entire CBAM bill is built on.
03
Your EU importer declares them
Your buyer's Authorised Declarant files those embedded emissions with the EU CBAM Authority — using your verified data, or punitive defaults if none was filed.
04
CBAM certificates are purchased
In 2026 the importer buys CBAM certificates at the quarterly Commission-published CBAM price. The official Q1 2026 price is EUR 75.36/tCO2e.
02
Step 2 is the fork — where the money is won or lost.
Without verified data
The EU applies official default values when verified data is not available. For a 1,000 t India CN 72083900 hot-rolled steel scenario, the buyer-side default cost is about EUR 254K before any Indian carbon-price credit.
With verified actuals
CarbonSettle files your real, pre-verified emissions — accepted by the declarant on day one. In the same scenario, a 2.00 tCO2e/t actual-emissions file puts the buyer-side cost near EUR 147K.
Why CBAM exists
Carbon leakage — in one sentence.
Without CBAM, EU manufacturers paying for carbon emissions through the EU ETS would lose to imports from countries with no equivalent carbon price — India, China, Turkey, Russia. CBAM closes that gap by making imports pay the same carbon cost as EU production.
It's part of the EU's European Green Deal and the “Fit for 55” package — the bloc's commitment to cut greenhouse gas emissions by 55% by 2030.
Sectors covered
Six product categories. Hundreds of CN codes.
If your product sits under any of these CN codes and goes to the EU, CBAM compliance is mandatory from January 2026.
Iron & Steel
CN 72, 73Pig iron, HR coils, TMT bars, pipes, fasteners, sheets
Sector guide
Aluminium
CN 76Unwrought aluminium, extrusions, foil, wire, structures
Sector guide
Cement
CN 2523Clinker, portland cement, aluminous cement
Sector guide
Fertilizers
CN 28, 31Urea, ammonia, nitric acid, nitrates
Sector guide
Hydrogen
CN 2804 10Pure hydrogen
Electricity
—Electrical energy imported into the EU
Timeline
CBAM, 2023 — 2034
- May 2023
CBAM Regulation (EU 2023/956) formally published
- Oct 2023
Transitional phase begins — quarterly reporting required
- Jul 2024
EU default values restricted — actual data increasingly required
- Dec 2025
Transitional phase ends
- Jan 2026 · now
Definitive phase begins — financial payments mandatory
- 2026–2034
CBAM certificates required, free EU ETS allowances phased out
CBAM impact · India
Why India sits at the centre of the CBAM map.
~18%
Of global CBAM cost projected to fall on India
24.4%
Drop in EU-bound Indian steel & aluminium exports in FY25
€60–80
Added cost per tonne for Indian BF-BOF steel
30–40%
Saving when verified actuals replace EU defaults
Why India is especially exposed
Indian manufacturing leans on coal — both for grid power and industrial heat. India's grid emission factor is ~0.7–0.9 tCO₂/MWh vs ~0.3 in the EU. For aluminium smelting (~15,000 kWh per tonne) that single difference adds $1,500+ per tonne. Verified actuals are the only way to defend Indian numbers.
Frequently asked
CBAM — the questions Indian exporters ask first
What is the full form of CBAM?
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CBAM stands for Carbon Border Adjustment Mechanism. It is a regulation by the European Union (EU Regulation 2023/956) that applies a carbon price to goods imported into the EU from countries that do not have equivalent carbon pricing systems. It is sometimes called the EU carbon border tax or carbon import tax.
What is the meaning of CBAM in simple terms?
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In simple terms, CBAM is a carbon tax on imports into the EU. When Indian manufacturers export steel, aluminium, cement, fertilizers, or hydrogen to EU buyers, those buyers must now pay for the CO₂ emissions that were released during manufacturing in India. The EU does this to prevent "carbon leakage" — companies moving production to countries with weaker climate rules to avoid paying for their carbon emissions.
When did CBAM start?
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CBAM started on October 1, 2023 in a transitional (reporting-only) phase. The definitive phase — where EU importers must purchase CBAM certificates and make actual financial payments — began on January 1, 2026. From 2026 onwards, importers face financial penalties for non-compliance.
Does CBAM apply to India?
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Yes. India is one of the countries most affected by CBAM. India is among the largest exporters of steel and aluminium to the EU, and Indian manufacturing is more carbon-intensive than EU production due to coal-heavy power grids. India is projected to bear approximately 18% of the total global CBAM cost. Indian steel and aluminium exports to the EU already dropped 24.4% in FY25 due to CBAM anticipation.
How much does CBAM cost Indian exporters?
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CBAM cost depends on your product and emission intensity. At current EU ETS prices (~€80/tonne CO₂): Indian BF-BOF steel faces additional costs of €60–80 per tonne. Indian coal-powered aluminium faces costs of $1,500–1,600 per tonne. For a typical Indian exporter shipping 5,000 tonnes annually, using EU default values instead of verified actual data costs ₹1.5–3.5 crore in unnecessary additional CBAM tax. Using actual emission data saves 30–40%.
What happens if an Indian exporter ignores CBAM?
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If you do not provide verified emission data, your EU buyer is forced to use punitive EU default values (set at the worst 10% of EU producers), making your products significantly more expensive than competitors. EU importers face fines of €10–€50 per tonne for non-compliance. Most critically, EU importers will simply stop buying from non-compliant suppliers and switch to competitors who provide verified data.
What is a CBAM certificate?
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A CBAM certificate is a digital certificate purchased by EU importers that represents one tonne of CO₂ embedded in imported goods. The price of CBAM certificates is linked to the weekly average EU ETS auction price (currently ~€80/tonne CO₂). EU importers must surrender enough certificates to cover the total embedded emissions in their imports, minus any carbon price already paid in the exporting country.
How can Indian exporters get CBAM compliant?
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The fastest way is to partner with an end-to-end CBAM compliance service like CarbonSettle. You share your factory data (electricity bills, fuel invoices, production logs), and CarbonSettle handles everything: emission calculations, supplier data collection, EU XML report generation, audit preparation, verifier coordination, and EU importer handoff. First reports can be ready within 2–4 weeks.
2–3 day onboarding · Same-day first report
CBAM is here. Let's take it off your plate.
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