By Saunak Saha

The global rules of industrial competitiveness are being rewritten, with carbon now at the centre of global trade. As climate policy moves beyond national boundaries, emissions performance is increasingly shaping market access and cost structures. The introduction of the Carbon Border Adjustment Mechanism (CBAM) by the European Union addresses the growing link between industrial emissions and cross-border trade.

CBAM ties market access to verified emissions performance by applying EU-ETS-linked carbon costs to imports of emissions-intensive goods, including steel, aluminium, cement, fertilizers, electricity, and hydrogen. The mechanism aims to curb carbon leakage, encourage cleaner production globally, and leverage the EU market to influence upstream industrial emissions.

The Shift for India’s Metals and Mining Sector

For India’s metals and mining sector, CBAM has transitioned from a future concern to an operational reality. As of 2026, carbon intensity directly influences export costs, margins, and market access. This marks a structural shift from cost-driven trade to carbon-aligned industrial performance. For producers, the challenge is less about border compliance and more about long-term relevance in a carbon-constrained global market.

Key strategic drivers

  1. Embedded Carbon Costs: Embedded emissions in steel and aluminium exports to the EU now attract an explicit carbon price aligned with the EU ETS. Carbon intensity is no longer an abstract sustainability metric; it directly shapes landed cost and commercial viability.
  2. Sectoral Exposure: Iron, steel, and aluminium account for the overwhelming share of India’s CBAM-covered exports. High emissions intensity combined with deep integration into EU value chains makes CBAM a material industrial risk.
  3. Technology Pathways: Legacy assets—specifically coal-based BF-BOF steelmaking and coal-linked power for aluminium—are increasingly misaligned with global benchmarks. CBAM accelerates the competitiveness gap favoring low-carbon pathways such as scrap-based EAFs, gas-DRI, and renewable-linked smelting.
  4. Carbon Governance: Weak Monitoring, Reporting, and Verification (MRV) systems translate into higher liabilities through conservative “default values.” Incomplete upstream data can materially inflate the declared footprint of finished products.

Priorities for Metal Producers

  • Establish Robust MRV: Plant-level, auditable emissions data covering direct, indirect, and precursor emissions is the primary defense against inflated default costs.
  • Target High-Intensity Processes: Accelerating scrap blending, gas-based DRI, and hydrogen-ready designs for steel—alongside clean power sourcing for aluminium—delivers the fastest reductions in emissions intensity.
  • Domestic Market Alignment: India’s Carbon Credit Trading Scheme (CCTS) provides a domestic price signal. Aligning with this allows carbon costs to be internalized at home, with revenues potentially retained for transition funding rather than paid as border taxes.

Bottom Line

For the metals and mining sector, CBAM is a signal that global markets will increasingly reward verified low-carbon production and credible transition pathways. The primary risk lies in delayed adjustment. Companies that treat carbon pricing as a strategic input—rather than a compliance afterthought—are better positioned to protect margins and remain competitive in global value chains.

Bharat Steel 2026, India’s flagship international exhibition and conference for the steel sector, will be held on April 16 and 17 at Bharat Mandapam in New Delhi under the aegis of the Ministry of Steel. The platform aims to foster meaningful discussions on key issues such as the Carbon Border Adjustment Mechanism (CBAM), decarbonisation priorities and emissions governance. It will offer stakeholders an opportunity to better understand evolving global regulations while working collectively to identify practical solutions, align transition pathways and shape a shared roadmap.

The author is Partner, Climate Change and Sustainability Services, Ernst & Young.

Disclaimer: The views expressed are the author’s own and do not reflect the official policy or position of Financial Express.