Enacted by the European Parliament in April 2023, the Cross Border Adjustment Mechanism (CBAM) is a “‘carbon tariff’” that applies on products manufactured outside the European Union (EU). It takes effect starting October 2026, with reporting starting October 2023. To begin with, the CBAM covers five carbon-intensive sectors – Iron and Steel, Cement, Fertilisers, Aluminium and Electricity generation. The EU proposes to cover additional sectors from 2027 onwards.

The CBAM renders at risk India’s carbon-intensive exports to the EU, which totalled €7.88 billion in 2022. This article decodes CBAM for India Inc. decision-makers and highlights the urgency for action. Specifically, we cover the following topics:

• CBAM and the EU ETS (Emissions Trading System)
• Financial exposure for impacted sectors in India Inc. 
• Suite of decarbonisation solutions including carbon abatement and carbon removal
• Challenges and opportunities for Small and Medium Enterprises (SMEs)
• Success stories and case studies