wl-4279-CBAM and Steel Decarbonisation in India: A Barrier, Facilitator, or Neither?

The EU’s carbon border adjustment mechanism (CBAM), the maiden border carbon adjustment (BCA) on cross-border trade, has entered with effect from October 2023. India being a major exporter of steel items to the EU, the article explores the potential impact of the CBAM on the iron and steel sector in India. It takes a deep dive into the challenges of decarbonization in the sector and brings out the dichotomy between the large and small producers. The paper argues that the extent to which CBAM may induce enhanced decarbonization on the big steel players would depend on how they are positioned and what strategy they adopt. However, small players who are exposed to CBAM are likely to be highly vulnerable, either directly or indirectly through the supply chain as they continue to grapple with financial, technological and capacity constraints. The article concludes with a set of policy recommendations for the EU to align CBAM with a fair and just transition in the Global South and help advance the Paris Agreement’s goals.