How the EU Carbon Border Levy Is Worked Out for Indian Steel and Aluminium

The European Union's Carbon Border Adjustment Mechanism (CBAM) entered its definitive phase on 1 January 2026. It charges EU importers for the greenhouse gas emissions embedded in iron and steel, aluminium and other covered goods, at a price tied to the EU's carbon market. For Indian exporters, the bill goes to the buyer in the EU, but the number behind it comes from the exporter's verified data or, if that is unavailable, from EU default values.

Three inputs decide the amount: the emissions in each tonne, the free allowances that EU producers still receive, and any carbon price already paid in the country of origin. The sections below set out how each works, the prices published so far in 2026 and the deadlines that follow.

Who Pays, and Which Importers Must Register

Importers that bring more than 50 tonnes of CBAM goods into the EU must become authorised CBAM declarants, or have an indirect customs representative do so. Declarants buy certificates from their national competent authority. Each certificate represents one tonne of CO2-equivalent embedded in the imported goods.

Sales of certificates for 2026 imports open on 1 February 2027. Declarants must hold certificates equal to at least 50% of the emissions imported so far in the year by 31 March, 30 June, 30 September and 31 December 2027. The 2026 certificates must be surrendered by 30 September 2027, and importers can ask to buy back surplus certificates by 31 October 2027.

The importer carries the legal duty, but the emissions data behind each declaration starts with the producer. The reporting duties described later in this article reach Indian factories as well.

The Formula Behind the Certificate Count

The calculation guide gives the core formula. The number of certificates equals specific embedded emissions (SEE), minus a specific free-allocation amount (SEFA), minus a carbon price term, multiplied by the tonnes imported, with a negative result set at zero. Multiplying that count by the certificate price gives the obligation in euros.

SEFA is the CBAM benchmark for the good multiplied by a CBAM factor, which the guide gives as 97.5% for 2026, and by a cross-sectoral correction factor, which is 100% for 2026 to 2030. The CBAM factor is the share of free allocation that EU producers retain in that year, and SEFA is subtracted from the embedded emissions before any certificate is counted.

The carbon price term covers carbon pricing paid in the country of origin, but as of 12 October 2026 no country's carbon price has been recognised under Article 9, India included, and the implementing rules are still a draft. The guide ties the formula to Articles 7, 9 and 31 of Regulation (EU) 2023/956.

How the Quarterly Certificate Price Is Set

In 2026 the certificate price is the average of EU ETS auction prices for EU allowances, expressed in euros per tonne of CO2. The Commission publishes it each quarter. The published prices so far are €75.36 for Q1, €75.28 for Q2 and €82.32 for Q3, the last published on 5 October 2026. The Q4 figure is due on 4 January 2027.

From 2027 the Commission will publish prices weekly, based on EU ETS auction prices from the previous week. The weekly series replaces the quarterly figures for 2027 and later years.

The guide's worked example uses 1,000 tonnes of Turkish steel billets, not Indian steel, to show the arithmetic. A marked-up default of 2.541 tCO2e per tonne, less a free-allocation amount of 1.3299, gives 1,211.1 certificates. At the Q3 price of €82.32, the obligation is €99,697.75. That is 47.7% of the €209,175 that would apply before the free-allocation deduction.

Indian Steel's Default Values and Mark-Ups

Where an exporter cannot supply verified emissions data, the EU applies default values set for each country of origin. For India, Implementing Regulation (EU) 2025/2621 sets 4.28 tCO2e per tonne for hot-rolled flat products, 4.20 for direct reduced iron, 2.53 for pig iron and 6.49 to 6.50 for stainless flat products, according to a summary of that regulation published by Greensutra.

Mark-ups are added on top of the defaults: 10% in 2026, 20% in 2027 and 30% from 2028. Hot-rolled flat products therefore carry 4.71 tCO2e per tonne in 2026. The calculation guide says the mark-up is not offset by the free-allocation deduction and is charged in full. The defaults cover direct emissions only; indirect, electricity-related emissions are excluded.

The EU imported €3.9 billion of iron and steel from India in 2024, making India the bloc's largest source of such imports that year, according to Eurostat data cited by Down To Earth. The Global Trade Research Initiative estimates that steel and aluminium exports to the EU fell 24.4% in FY25, before certificate payments began, and attributes part of the decline to reporting and compliance requirements. ICRIER's modelling study projects a 24% fall in India's steel exports to the EU.

For Indian exporters, the bill goes to the buyer in the EU, but the number behind it comes from the exporter's verified data or, if that is unavailable, from EU default values.

What Exporters and MSMEs Must Report

Although EU importers bear the legal responsibility to buy certificates, exporters must establish the embedded emissions in their products. That means obtaining data from suppliers, arranging verification and giving EU customers the information they need to comply. The requirements can extend beyond the factory's own emissions to the carbon intensity of steel, components and other inputs.

If suppliers cannot provide verified data, exporters may use the applicable default values, which carry the mark-ups described above.

Smaller firms face particular pressure. Garodia, quoted by Down To Earth, estimated that compliance and certification could cost Rs 5-10 million, depending on manufacturing capacity. He also said the price gap between steel from large producers and from secondary producers could be around 15 to 20%, making it difficult for smaller and medium manufacturers to switch all their inputs to more expensive material from large producers.

Where the Bill Can Be Reduced

The levers in the formula are the emissions figure, the mark-up and the carbon price term. Verified emissions data in place of default values avoids the mark-up on the default. Lower embedded emissions per tonne reduce the certificate count, because each certificate covers one tonne of embedded emissions.

The certificate price sits outside the exporter's control, since it follows the EU ETS auction average. A carbon price paid in the country of origin could reduce the obligation through the carbon price term, but as of 12 October 2026 no country's carbon price has been recognised under Article 9, India included.

The first surrender deadline, for 2026 emissions, is 30 September 2027. The most recent quarterly price is the €82.32 published for Q3 2026.