EU Expands Carbon Tax on Indian Exports

The European Union is planning a major expansion of its European Union===Carbon tariff (CBAM), a border carbon tax, which could sharply increase carbon tax costs on Indian manufactured exports to Europe. The European Union===European Parliament's Committee on the Environment, Climate and Food Safety (ENVI) has proposed extending CBAM to approximately 180 additional steel- and aluminium-based manufactured products from January 1, 2028. The proposed changes also include tightening carbon accounting rules for scrap-based production by including emissions from pre-consumer scrap, examining the expansion of the mechanism to indirect emissions from electricity use across more sectors, and rejecting international carbon credits for compliance. The Global Trade Research Initiative (GTRI) warns that this move will turn CBAM into a much wider carbon tax covering manufactured industrial goods, impacting Indian exporters of engineering goods, auto components, fabricated metal products, machinery, and aluminium manufactures. This development comes as India and the EU are moving towards a free trade agreement, potentially leading to a scenario where EU products enter India at zero tariffs while Indian exports face rising CBAM charges in Europe.