The European Commission has decided to help Indian exporters understand the reporting regulations under the Carbon Border Adjustment Mechanism (CBAM) rules, which will kick off from October 1, 2023, by organising six online webinars, that will cover the general features of the mechanism as well as the specifics of each of the six affected “carbon-intensive” sectors — iron and steel, aluminium, cement, fertilizers, electricity and hydrogen. Exporters across these sectors have reportedly been asked by the Indian government “to register and participate in (these) webinars” and workshops, as per a mail sent out by one of the Ministries.

e-Learning courses are being designed too, while training will also be imparted on calculation of carbon emissions.

The e-mail, a copy of which is with businessline, is addressed to several stakeholders who are likely to be impacted once the CBAM takes effect. The e-mail also states that these online workshops will be held between September and October where  participants “will have the possibility to ask questions” and these “will be answered live.” 

All webinars will be recorded and uploaded on the Customs and Tax EU Learning Portal. 

The European Commission adopted the rules governing the implementation of the CBAM during its transitional phase, which starts on October 1, “and runs until the end of 2025”. 

In the CBAM’s transitional phase, “traders will only have to report on the emissions embedded in their imports subject to the mechanism without paying any financial adjustment.” 

“This will give adequate time for businesses to prepare in a predictable manner, while also allowing for the definitive methodology to be fine-tuned by 2026,” the mail mentioned. 

From January 1, 2026, the EU importers will have to buy CBAM certificates, corresponding to the embedded emissions above the EU-ETS benchmark levels. Penal taxes under CBAM are to be levied from 2026 on entities that do not meet the CBAM requirements. Steel and aluminium exports are supposed to be amongst the worst hit sectors once the CBAM reporting mechanism coming into effect. 

The idea behind the transition phase of CBAM is to ensure that all affected industries are made aware of the reporting obligations and allowed to familiarise themselves with the system, a senior EU official told businessline.

“The EC is working with several countries, including India, to minimise administrative burden on the sectors covered under CBAM and ensure their smooth functioning,”the official said. It was unlikely that MSMEs would get affected as sectors like steel and aluminium, that have been identified as carbon intensive under CBAM, mostly have large players, the official added.

Tools being developed 

Dedicated information technology tools to help importers perform and report these calculations “are currently being developed” along with other training materials. Webinars and tutorials to support businesses when the transitional mechanism begins will be carried out. 

“While importers will be asked to collect fourth quarter data as of October 1, 2023, their first report will only have to be submitted by January 31, 2024,” the mail from the Ministry said. 

“The European Commission will soon publish e-learning courses... covering both general and sector-specific content,” the mail mentioned. 

After the end of the transition period, over the subsequent eight years (CY26-34), “the phasing-out of free allocations, available to EU-based steel mills, will happen parallelly with the phasing-in of CBAM”. 

From January 1, 2026, the EU importers will have to buy CBAM certificates, corresponding to the embedded emissions above the EU-ETS benchmark levels.

 As per the schedule sent out by one of the ministries, the webinar on cement sector will take place on September 15, while that on aluminium will take place on September 21. The workshop covering fertilisers will be on September 26, while for the Electricity and Hydrogen sectors tue workshops are scheduled on September 28 and October 3 respectively.  The last workshop on steel will be on October 5.

Probable loss of market share

As per a sectoral report by ratings agency ICRA, CBAM compliance requirements could pull down the profits of Indian steel exports to EU by $60-165 per tonne between 2026 and 2034.

“The prospect of incidence of a large carbon tax from Q4 FY2026 can incentivise EU importers to shift towards steel producers, having a low carbon footprint, much ahead of the outer deadline. Therefore, unless Indian mills can materially bring down their carbon footprint during the transition period, it can potentially lead to lower profits and a loss of market share in Europe,” ICRA said in a report. 

Apart from India, some of the other large steel exporters to the EU are from Turkey, Russia, Ukraine, South Korea, Taiwan, Vietnam, China and Japan. However, carbon footprint of Indian steel mills is significantly higher than key competing suppliers to the EU. 

The top five domestic primary steel producers have an average emission intensity of 2.6 tonne CO2/ tonne of crude steel produces, which is 12 per cent higher than the global average from the BF-BoF route ( 2.32 tonne CO2/tonne of crude steel).