The Carbon Border Adjustment Mechanism (CBAM) is a new policy introduced by the European Union (EU) that aims to reduce carbon emissions by ensuring that imported goods are subject to the exact carbon pricing as goods produced within the EU. This policy will kick in on October 1, 2023, for the steel and aluminum industries. Firms that take steel and aluminum into the EU must establish measurement systems about carbon intensity and deliver statements on it. The CBAM will be fully implemented by January 1, 2026.
The CBAM will impact India as it is one of the major exporters of steel and aluminum to the EU. Indian policymakers and firms need to recognize this emerging landscape and better embed the Indian economy within it. India needs to build information systems to track upstream (“embedded”) emissions, similar to the GST system. India’s great asset is the plentiful sunshine, which gives it a strong position on renewable energy. India needs to become a pioneer in putting their electricity sector on a sound footing to fully support their export sector’s renewable electricity requirements at efficient prices.
