The EU’s CBAM will impact the global business environment concerning carbon emissions.Even though India hasn’t introduced CBAM yet, Indian manufacturers or exporters could be affected if they send goods that are covered under CBAM in the European Union.To meet customer needs and stay competitive in international markets, Indian companies might need to prepare by gathering enough information about carbon emissions and increasing energy efficiency.EU CBAM is different from industrial certification in several ways.CBAM is focused on carbon emissions, while industrial certification deals with meeting various EN and ISO standards like EN 15085, EN ISO 3834, EN 1090, and ISO 9712.These two things serve completely different purposes.CBAM aims to control carbon emissions, while industrial certification ensures product quality and technical compliance.
EU CBAM
CARBON BORDER
COMPLIANCE
EU CBAM Explained: Impact on Indian Manufacturers, Exporters and Industries – Complete Guide 2026
By PZVAR Technical Editorial Team
12 Min Read
20 July 2026
Table Of Contents
- Introduction
- What is EU CBAM? Facts & Objectives
- What is Carbon Leakage and Why was EU CBAM Initiated?
- Timeline of History and Implementation of EU CBAM
- EU CBAM and How It Works: Embedded, Direct and Indirect Emissions Explained
- EU CBAM Covered Sectors and Manufacturers Affected by EU CBAM
- Countries Adopted or Planning for CBAM
- Does India Have CBAM? Know About India’s Carbon Credits Trading Mechanism
- Why hasn’t India adopted Carbon Border Adjustment Mechanism?
- Effect of EU CBAM on Indian Industries and Exporters
- Pros and Cons of EU CBAM
- Case Study & Process of EU CBAM in Context of Indian Manufacturers
- Processing Guide
- EU CBAM Readiness Checklist
- EU CBAM, Industrial Certification and Role of PZVAR
- FAQs
- Conclusion
Key Takeaways
EU CBAM
Carbon Border
Adjustment Mechanism
Security
Introduction:
Indian manufacturers and exporters, including those making iron and steel, aluminium, cement, fertiliser, and hydrogen products, are facing challenges due to the new EU CBAM rule.The climate is changing how products are made and sold globally.In the past, companies mainly focused on quality, price, and delivery.Now, carbon emissions from manufacturing are also becoming a key factor in international trade.The European Union created the Carbon Border Adjustment Mechanism to add a cost related to carbon emissions for certain goods imported into the EU.This guide explains what EU CBAM is, why it was introduced, how it works, which industries might be affected, how it could impact India, and how Indian manufacturers can get ready for new carbon-related trade rules.
What is EU CBAM? Facts & Objectives
The EU CBAM stands for the European Union Carbon Border Adjustment Mechanism.It’s a climate and trade policy that the European Union has put in place to make sure imported goods that are high in carbon emissions pay a fair cost for their carbon impact.
The European Commission explains that the main goal of the EU CBAM is to stop carbon leakage and to encourage cleaner ways of making products.
Carbon leakage happens when companies move their production to places where there are lower carbon costs, or when goods made with more carbon emissions are imported instead of those made in the EU.
For example, a steel factory in the EU has to pay for its carbon emissions under the EU Emissions Trading System (EU ETS).
However, steel producers in other countries may not be paying such costs.The EU CBAM aims to make sure that the cost of carbon is the same for products imported into the EU and those made within the EU.
The EU CBAM was introduced to help achieve the EU’s climate goals.
These include the European Green Deal and the EU’s plan to become climate-neutral by 2050, as well as the target to reduce net greenhouse gas emissions by at least 55% by 2030.
EU CBAM Quick Facts
| Question | Simple Answer |
|---|---|
| What is CBAM? | Carbon Border Adjustment Mechanism |
| Who established the EU CBAM? | European Union |
| Why was it established? | To reduce carbon leakage and foster greener production |
| What is the key EU CBAM regulation? | Regulation (EU) 2023/956, as amended |
| Since when is the transitional phase operative? | From 1 October 2023 |
| Since when is the definitive phase operative? | From 1 January 2026 |
| Which sectors does it cover? | Specific goods in the sectors of iron and steel, aluminium, cement, fertilisers, electricity, and hydrogen |
| Does EU CBAM apply to all imported products? | No |
| Has India established its own CBAM? | No |
| Are Indian exporters affected by it? | Yes, while exporting certain CBAM goods to the EU |
What Is Carbon Leakage? Why Was EU CBAM Adopted?
Carbon leakage happens when companies move their carbon-heavy activities to another country that has lower carbon costs or less strict climate rules.Another type of carbon leakage is when products made in the EU are replaced by imported goods that create more carbon emissions.
The EU CBAM was created to stop these problems.
This system helps make the carbon cost of imported products match the carbon cost of goods made inside the EU.It also encourages cleaner ways of making things.
For example, if a steel company moves its factories out of the EU to avoid paying for carbon emissions, it doesn’t actually lower global emissions.
Instead, emissions just move to another country.The EU CBAM is meant to stop this from happening.
Legal reference: Regulation (EU) 2023/956 establishing the Carbon Border Adjustment Mechanism
Timeline of History and Implementation of EU CBAM
The EU CBAM has been introduced step by step as part of the European Union’s efforts to reduce carbon emissions and prevent carbon leakage.
| Year | Key milestone |
|---|---|
| 2005 | Introduction of the EU Emissions Trading System (EU ETS) that included carbon pricing for relevant sectors. |
| 2019 | Launch of the European Green Deal aimed at making the EU climate-neutral by 2050. |
| 2021 | Proposal by the European Commission to implement the EU CBAM in the Fit for 55 package. |
| 2023 | The CBAM Regulation is adopted by the EU. The transitional reporting period commenced on 1 October 2023. |
| 2023-2025 | The embedded emissions of relevant goods were reported by EU importers. The EU CBAM payment of certificates was not obligatory during this phase. |
| 2026 | The definitive EU CBAM came into effect on 1 January 2026. |
The EU CBAM was rolled out in steps to allow importers and producers time to learn about the rules, gather emissions data, and get ready for the full system.The temporary phase started on 1 October 2023 and ended on 31 December 2025, after which the full EU CBAM system began on 1 January 2026.For more details, check the European Commission’s official CBAM Registry and reporting instructions.
EU CBAM and How It Works: Embedded, Direct and Indirect Emissions Explained
The EU CBAM looks at the carbon emissions that come from making certain products that are brought into the European Union.These emissions are called embedded carbon emissions.
The process is straightforward.
A manufacturer in another country makes a product that is covered by CBAM.They then gather information about how the product is made, including fuel and electricity usage.After that, the embedded emissions are calculated and shared with the EU company that will import the product.This helps the EU importer follow the rules set by the CBAM.
Embedded emissions can be split into two main parts:
Direct emissions: These are the carbon emissions that happen during the manufacturing process, like emissions from furnaces, fuel used, and other industrial activities.
Indirect emissions: These are emissions linked to the electricity used during production, and they are considered under the CBAM rules.
For example, an Indian steel producer would need to give details about the fuel and electricity they used to make steel products that are sent to the EU.
This helps the EU importer understand the carbon emissions linked to those products.
It’s important to know that the way emissions are calculated and reported can vary depending on the product and the current rules of the EU CBAM.
EU CBAM Covered Sectors and Manufacturers Affected by
EU CBAM applies to certain carbon-heavy products that are brought into the European Union.Here is the list of main sectors that are currently included in EU CBAM:
Iron & Steel
Aluminum
Cement
Fertilizers
Electricity
Hydrogen
Companies that make or export these products will need to give their EU customers information about how they make the products, how much energy they use, and how much carbon they release.
For example, Indian companies that make steel, aluminum, cement, fertilizer, or hydrogen and sell these products to the EU might be affected by EU CBAM.
However, not all products in these sectors are covered by CBAM.Before exporting, it’s important to check the product’s customs classification, the relevant CN code, where the product comes from, how much is being imported, and what the current EU CBAM rules require.
Countries Adopted or Planning for CBAM
The EU’s CBAM has been created under one shared system across all 27 of its member countries.The UK intends to start building its own CBAM beginning in 2027.Some other nations, including Australia, Canada, and the US, have considered similar ideas, but so far none have actually developed a CBAM.
Does India Have CBAM? Know About India’s Carbon Credits Trading Mechanism
India hasn’t started using its own Carbon Border Adjustment Mechanism (CBAM) yet.
The EU CBAM is a policy made by the European Union.
However, Indian producers and exporters might still be affected if they send certain products to the EU.
India is setting up its own carbon market through the Carbon Credit Trading Scheme (CCTS).
This scheme helps reduce, remove, or avoid greenhouse gas emissions in India by using carbon credits.
The CCTS and the EU CBAM are different.
The CCTS is a system within India, while the EU CBAM deals with the carbon emissions of products that are brought into the EU.
The main differences are as follows:
| Area | EU CBAM | India's Carbon Credit Trading Scheme |
|---|---|---|
| Purpose | Imposes carbon obligations on selected goods being imported into the EU | Serves emissions reduction and carbon credits trading in India |
| System | Carbon-border adjustment system | Domestic carbon market system |
| Focus | Embedded carbon emissions from covered imported products | Reduction of greenhouse gases and carbon credit systems |
| Participants | EU importers, authorized CBAM declarants, and foreign manufacturers furnishing emissions data | Indian eligible industries and participants in the carbon market |
| Primary area | EU imports | Indian carbon market |
| Are the two systems similar? | No | No |
The Carbon Credit Trading Scheme in India could help companies better measure their emissions, manage carbon data, and track and report their emissions along with efforts to reduce industrial carbon output.
However, Indian companies exporting goods subject to CBAM to the European Union should still know about the EU CBAM rules and regulations.
Using the Carbon Credit Trading Scheme in India does not automatically mean the company follows EU CBAM guidelines.
Why hasn’t India adopted Carbon Border Adjustment Mechanism?
India has not started using its own CBAM yet.Right now, the country is focusing on creating its own carbon market and expanding renewable energy sources.Setting up a carbon border system would be difficult for India because it could affect different industries and change the prices of products.
| Primary Factor | Simplified Explanation |
|---|---|
| Development of domestic carbon market | India is developing its carbon market via carbon credit programs, emission goals, monitoring, reporting and verification processes. |
| Economic and developmental priorities | India is a developing nation with significant priorities including job creation, infrastructure, energy, production and export-oriented industries. |
| Fossil-fuel based energy dependence | Many Indian industries rely on coal and other fossil fuel-based energy sources; the imposition of a carbon price may prove challenging for energy-intensive industries. |
| Difficult implementation process | The establishment of a CBAM will involve customs integration, product classification, emission calculation, carbon pricing, digital reporting and verification. |
| Climate equity issues | India believes in the concept that nations vary in terms of historical emissions, developmental requirements, financial capabilities and technological advancements. |
| International trade issues | The introduction of a CBAM in India can impact import prices, domestic producers and international trade connections. |
India might continue to focus on reducing carbon emissions at home, expanding renewable energy, building a carbon credit system, and boosting industrial growth before starting its own CBAM program.
Reference: Government of India – Carbon Credit Trading Scheme and Indian Carbon Market framework.
Effect of EU CBAM on Indian Industries and Exporters
EU CBAM could impact Indian companies that export specific products like steel, aluminium, cement, fertiliser, and hydrogen to the European Union.These industries tend to produce a lot of carbon emissions because they use a lot of fuel, electricity, and raw materials during production.
Steel producers might need to share details about how they make steel, how much fuel and electricity they use, and the carbon emissions tied to their products.
Companies that use cleaner energy, recycled steel, and energy-saving technologies might have an advantage in markets that value low carbon emissions.
Aluminium makers use a lot of electricity.
Where this electricity comes from can affect how much carbon the final product emits.Using renewable energy and efficient equipment may help cut down on emissions.
Cement producers create emissions through fuel use, electricity use, and the process of making clinker.
Using cleaner fuels, renewable energy, and efficient production methods can help reduce emissions.
Fertiliser manufacturers may emit carbon during ammonia production, chemical processing, and energy use.
Having better data on emissions can help companies understand and manage their carbon footprint.
Hydrogen producers could have varying emission levels based on how they make hydrogen and what energy source they use.
Producing hydrogen with renewable energy might create new chances for India in the low-carbon economy.
Indian exporters might face issues such as higher costs for compliance, complicated calculations for emissions, and the need for more accurate production data.
However, companies that use cleaner energy, improve efficiency, and cut down on carbon emissions might gain a stronger position in European and international markets.
Pros and Cons of EU CBAM
The EU CBAM is beneficial, but it also comes with some difficulties.It can encourage companies to reduce their carbon emissions and use more eco-friendly ways to make products.However, it might also result in higher costs for manufacturers and exporters, along with more paperwork and reporting requirements.
| Pros | Cons |
|---|---|
| Incentivizes greener manufacturing processes | Cost of compliance could increase |
| Helps mitigate carbon leakage | Carbon calculation is complicated |
| Fulfills global climate objectives | Difficulty in collection of emissions data |
| Promotes use of renewable energy | Verification will add to costs |
| Boosts demand for low carbon goods | Lesser help for small firms |
| Improves energy efficiency | Necessity of new technology |
| Incentivizes greener industrial innovations | Varying carbon pricing |
| Could be good for low carbon manufacturers | Tougher position for developing-country exporters |
The introduction of the EU CBAM would present both difficulties and chances for Indian manufacturers.Companies would need to gather more accurate emission data, create more environmentally friendly technologies, and enhance their energy efficiency.However, the manufacturers that manage to reduce emissions and make low-carbon products will have an advantage in Europe and other regions around the world.
Case Study & Process of EU CBAM in Context of Indian Manufacturers
Example 1: Indian Steel Exporter
An Indian steel company sends covered steel plates to Germany.
The German buyer asks for information about emissions connected with the steel.
The Indian company gathers:
how much steel was made;
how much coal was used;
how much natural gas was used;
how much electricity was used;
and details about the production process.
They use the correct method to figure out the emissions.
They give this information to the buyer.The buyer uses it to meet their CBAM requirements.
Example 2: Aluminium Manufacturer
An Indian company that makes aluminium sends covered aluminium products to France.
The company uses a lot of electricity.
They look into:
how much electricity they use;
where the electricity comes from;
how much product they make;
and how much energy each product uses.
The company invests in renewable electricity.
Over time, the carbon footprint of their products may go down.
Example 3: Small Supplier
A small Indian company doesn’t export directly to Europe.
It makes steel parts for a bigger Indian exporter.The exporter asks for better details about the materials and production.The small company is affected through the supply chain.
Processing Guide
Indian manufacturers should not wait until a customer asks for urgent information.
Preparation can start early.
Step 1: Identify EU Exports
List all the products that are sent to the European Union.
Step 2: Check Product Codes
Find out the correct customs and CN codes for each product.
Step 3: Check CBAM Coverage
Compare those codes with the current scope of the CBAM regulation.
Step 4: Map the Production Process
Identify:
– The different stages of production;
– The machines used;
– The furnaces used;
– The fuel sources;
– The electricity sources;
– The raw materials used.
Step 5: Collect Energy Information
Gather:
– Electricity bills;
– Meter readings;
– Records of fuel purchases;
– Data about the equipment used.
Step 6: Collect Production Information
Record:
– The quantity of products made;
– The volume of production;
– The materials used;
– The production route or process.
Step 7: Identify Emissions Sources
Identify:
– Direct emissions from production;
– Indirect emissions that apply;
– Emissions from the production process;
– Emissions from related precursors.
Step 8: Improve Data Quality
Ensure that all records are:
– Complete;
– Accurate;
– Traceable;
– Consistent;
– Backed by evidence.
Step 9: Communicate With EU Customers
Ask customers:
– What information do they need?
– What format should it be in?
– What reporting period applies?
– What verification is needed?
Step 10: Plan Emissions Reduction
Look for opportunities like:
– Improving energy efficiency;
– Using renewable energy;
– Using cleaner fuels;
– Upgrading technology;
– Reducing waste.
EU CBAM Readiness Checklist
Products Checklist:
– List all products sent to the EU
– Make sure the customs category is correct
– Check what products are covered by CBAM
– Find out where the product was made
– Check if any exemptions apply
Manufacturing Checklist:
– Map out the production process
– Identify the manufacturing sites
– Find out how much was produced
– List the raw materials used
– Identify materials used to make the product
Energy Checklist:
– Collect data on electricity used
– Collect data on fuel used
– Note where the electricity comes from
– Check how much renewable energy is used
– Check if energy meters are accurate
Emissions Checklist:
– Identify direct emissions
– Identify indirect emissions
– Identify emissions from the production process
– Choose a way to calculate emissions
– Keep records of all emissions data
Communication Checklist:
– Find out who the EU importer is
– Check what the customer needs
– Agree on data formats to use
– Keep records of all communications
– Stay updated on EU news and changes
Improvement Checklist:
– Review energy use
– Find ways to save energy
– Evaluate renewable energy options
– Set goals to reduce emissions
– Track the carbon impact of products
EU CBAM, Industrial Certification and Role of PZVAR
EU CBAM and industrial certification are different.EU CBAM looks at the carbon emissions made when making certain products that are brought into the European Union.Industrial certification checks if a company, process, or person follows the rules of a specific standard.
PZVAR is a company that gives certifications based on European and international standards, such as:
EN 15085 – for welding parts used in trains and other railway vehicles;
EN ISO 3834 – for quality control during welding of metal;
EN 1090 – for building steel and aluminum structures correctly;
ISO 9712 – for training and certifying people who do non-destructive testing.
Some manufacturers may need to follow both EU CBAM and industrial certification rules.
For example, an Indian steel maker might have to give information about the carbon emissions from their production for EU CBAM, and also get EN 1090 or EN ISO 3834 certification depending on what they make and how they make it.
PZVAR’s certifications help ensure good quality, that products meet technical standards, and that they match what customers need.
But these certifications don’t take the place of EU CBAM rules.Also, following EU CBAM doesn’t mean a company doesn’t need to get the right industrial certifications.
Manufacturers can look into PZVAR’s certification services to find out which standards apply to their products, processes, and industry needs.
FAQs of EU CBAM
1. What is the EU Carbon Border Adjustment Mechanism for Indian exporters?
The EU Carbon Border Adjustment Mechanism is a carbon-border system introduced by the European Union. It applies to selected carbon-intensive goods imported into the EU. Indian manufacturers may be affected when exporting covered products to European customers because they may need to provide relevant production and embedded-emissions information.
2. Has India implemented its own Carbon Border Adjustment Mechanism?
No. India has not implemented its own CBAM. India is developing a domestic carbon-market framework through the Carbon Credit Trading Scheme. However, India’s carbon market is different from EU CBAM.
3. Which Indian industries are affected by EU CBAM in 2026?
Potentially affected sectors include iron and steel, aluminium, cement, fertilisers and hydrogen. Electricity is also included in the EU CBAM scope. Actual product coverage depends on the applicable customs classification and current EU rules.
4. How does EU CBAM affect Indian steel exporters?
Indian steel exporters may need to provide information about production processes, fuel consumption, electricity consumption, production volume and embedded emissions to support their EU customers’ CBAM obligations.
5. Does EU CBAM apply to every product exported from India to Europe?
No. EU CBAM does not apply to every product. Applicability depends on the product classification, customs code, origin, quantity, applicable exemptions and current regulations.
6. Who is responsible for purchasing EU CBAM certificates?
The formal obligations generally apply to the authorised CBAM declarant or applicable EU importer. However, overseas manufacturers may need to provide accurate emissions information.
7. What are embedded emissions under EU CBAM?
Embedded emissions are greenhouse gas emissions associated with manufacturing a product. They may include direct production emissions and applicable indirect emissions related to electricity consumption.
8. How can Indian manufacturers prepare for EU CBAM requirements?
Manufacturers can identify covered products, verify customs codes, collect production and energy data, calculate embedded emissions using applicable methods, maintain supporting records and communicate with EU customers.
9. Is India’s Carbon Credit Trading Scheme the same as EU CBAM?
No. India’s Carbon Credit Trading Scheme is a domestic carbon-market framework. EU CBAM is a carbon-border mechanism for selected goods imported into the European Union.
10. Can industrial certification replace EU CBAM compliance?
No. Industrial certification and EU CBAM have different purposes. Certifications such as EN ISO 3834, EN 15085, EN 1090 and ISO 9712 do not replace applicable EU CBAM requirements.