Financial, capacity constraints of EU's carbon border policy may disrupt India's steel sector

The EU’s Carbon Border Adjustment Mechanism can pose challenges for India’s small and medium-sized steel enterprises due to financial, technological and capacity constraints, an IIM-Lucknow study has found. Large integrated steel plants may, however, adapt their production to supply lower-carbon steel for the European Union (EU) market, according to the study.

Being implemented since October 2023, the Carbon Border Adjustment Mechanism (CBAM) aims to apply carbon content-based charges on imports of certain emission-intensive products such as steel from countries with less stringent emission regulations, including India.

While the EU argued that the CBAM would prevent carbon leakage and encourage decarbonisation, the study critically examined its real-world impl .

The research — conducted with inputs from the Institute of Management Technology-Ghaziabad and Yale University, US — has been published in the prestigious International Environmental Agreements: Politics, Law and Economics (Springer Nature).

“In this first-of-its-kind study in India, the researchers tested the hypothesis whether the EU’s ability to extend its regulation beyond borders, commonly known as the ‘Brussels Effect’, will drive decarbonisation in India’s steel industry through ..