Global Trade Research Initiative (GTRI) has said that the European Union’s (EU) plan to significantly expand its Carbon Border Adjustment Mechanism (CBAM) is likely to raise carbon tax costs on Indian manufactured exports to Europe. It said that Indian exporters selling into Europe may need to accelerate emissions accounting, supply-chain traceability, and decarbonisation investments to remain competitive in one of the country's key export markets. 

GTRI said as per the draft proposal, the European Parliament's Committee on the Environment, Climate and Food Safety (ENVI) proposed five major revisions to the CBAM regime. These include extending the mechanism to about 180 additional steel- and aluminium-based manufactured products from January 1, 2028. The draft also proposes stricter carbon accounting rules, including counting emissions from pre-consumer scrap in scrap-based production. Another key element under consideration is extending CBAM coverage to indirect emissions from electricity use across a wider set of sectors. 

GTRI Founder Ajay Srivastava said together, these steps would turn CBAM from a tax mainly on steel and aluminium raw materials into a much wider carbon tax covering manufactured industrial goods. He said the proposed expansion could bring a wide range of products under CBAM, including fabricated metal goods, tubes, pipes, fasteners, structural components, machinery parts, aluminium containers, and other semi-finished and finished engineering goods. He said while detailed product lists are yet to be published, the proposal indicates that the levy is moving deeper into the manufacturing value chain. He further said CBAM currently applies to imports of iron and steel, aluminium, cement, fertilisers, hydrogen, electricity, and select related products. He cautioned that from January 2028, Indian exporters of engineering goods, auto components, fabricated metal products, machinery, aluminium manufactures, and other industrial goods may increasingly face carbon-related charges when shipping to Europe.