The EU Carbon Border Adjustment Mechanism (CBAM) is a carbon pricing instrument that imposes a charge on imports of certain goods into the European Union, based on the embedded CO₂ in those goods and the carbon price that would have been paid under the EU Emissions Trading System (EU ETS) had the goods been produced within the EU. CBAM is the EU's mechanism for preventing "carbon leakage" — the risk that EU industrial producers are disadvantaged by stringent EU carbon pricing relative to producers in countries without equivalent carbon costs.
CBAM currently covers six product categories: steel and iron, cement, aluminium, fertilisers, electricity, and hydrogen. From January 2026, importers of covered products must surrender CBAM certificates corresponding to the embedded CO₂ in their imports, priced at the current EU ETS price. During the transitional period (2023–2025), only reporting obligations apply — but from 2026 the financial liability is real and growing with the EU ETS price trajectory.
For Indian industrial exporters, CBAM creates a direct financial incentive for CCUS investment — the cost of CCUS to reduce embedded CO₂ in exported products can be compared directly to the CBAM liability avoided by that reduction. In several sectors, NCM's analysis shows that CCUS investment pays back within 10 years from CBAM avoidance alone, without requiring any carbon credit revenue or government subsidy. This makes CBAM the most commercially powerful driver of CCUS investment in India's industrial sector.
Current EU ETS price per tonne CO₂ — the reference for CBAM liability calculation
CBAM full financial implementation year — when Indian exporters face real cash liability
NCM's estimate of total annual CBAM liability on Indian industrial exports by 2028 at €70/t ETS
Product categories currently covered: steel, cement, aluminium, fertilisers, electricity, hydrogen
NCM's sector exposure analysis uses India's 2023 export volumes to the EU, sector-average CO₂ intensity data, and the EU ETS forward price curve to estimate annual CBAM liability from 2026. All figures are NCM estimates based on publicly available data and are subject to revision as EU ETS prices, trade volumes, and CO₂ intensity data evolve.
| Sector | India–EU Exports (MT/yr) | Avg CO₂ Intensity (t/t product) | Est. Annual CBAM Liability @€70/t | Full Liability From | NCM Assessment Status |
|---|---|---|---|---|---|
| Steel & Iron | 15–18 | 2.2–2.5 | USD 1.1–1.4B | Jan 2026 | Assessed |
| Aluminium | 1.5–2.0 | 12–15 t CO₂/t Al | USD 160–210M | Jan 2026 | Assessed |
| Cement (Clinker) | 0.8–1.2 | 0.85–0.95 | USD 47–63M | Jan 2026 | In Progress |
| Fertilisers (Urea, NH₃) | 2.0–3.0 | 2.5–3.0 t CO₂/t urea | USD 280–420M | Jan 2026 | Assessed |
| Hydrogen | Negligible now | 10–12 (grey H₂) | ~0 now / growing | 2026 onward | Framework Only |
| Electricity (Direct) | Negligible | N/A | Negligible | 2026 | N/A |
| Downstream Steel Products | Proposed expansion | ~2.0 embedded | Potentially +USD 800M | 2028–2030 est. | Under Watch |
| Chemicals (proposed) | Proposed scope expansion | Variable | TBD | 2030+ est. | Under Watch |
Note: All figures are NCM estimates based on publicly available trade data, sector average CO₂ intensity reports (IEA, WSA, Cement Manufacturers' Association), and EU ETS price of €70/t. Actual CBAM liability will vary with export volumes, individual plant CO₂ intensity, EU ETS price at time of import, and any CBAM-equivalent carbon costs paid in India that are eligible for deduction. This table is updated quarterly by NCM. Last updated: February 2025.
India's steel sector faces the largest absolute CBAM liability — USD 1.1–1.4B/year by 2026. At 2.2–2.5 t CO₂/t steel (vs EU average ~1.6 t), Indian steel's carbon intensity differential creates a large CBAM wedge. JSW, Tata Steel, and SAIL are the three most exposed exporters. CCUS investment pays back within 10 years from CBAM avoidance at €60+ ETS price — without any subsidy or carbon credit revenue.
India's fertiliser CBAM liability is USD 280–420M/year and growing — because the EU is actively expanding green procurement requirements for fertilisers alongside the formal CBAM. Green urea certification (using captured CO₂ + blue/green H₂) simultaneously satisfies CBAM requirements and captures the USD 40–80/t green urea price premium. The combined revenue effect makes fertiliser CCUS the strongest commercial case NCM has assessed.
Aluminium's CBAM exposure is driven by carbon intensity differential: Indian aluminium at 12–15 t CO₂/t Al (from captive coal power) vs. Norwegian or Icelandic aluminium at <1 t CO₂/t Al (from hydropower). The differential is enormous — CBAM creates a €800–1,000/t aluminium liability for coal-powered Indian producers vs. zero for hydro-powered Nordic producers. CCUS on captive coal power is the only near-term solution.
The European Commission has committed to reviewing CBAM's product scope and considering expansion to additional sectors by 2026. The most commercially significant potential expansion for India is downstream steel products — processed steel items such as tubes, pipes, fasteners, wire, and structural steel that are currently not covered by CBAM but that represent a substantial fraction of India's steel export value. If downstream steel products are added to CBAM's scope (as many EU steel producers are advocating), India's total steel CBAM liability could increase by an additional USD 600–900M annually.
Chemicals are a second likely expansion category — particularly ammonia and methanol, which are currently excluded from CBAM but whose embedded CO₂ intensities are very high. Indian ammonia exports to Europe (primarily for fertiliser production) and methanol exports (industrial chemical uses) would face significant CBAM liability if these products are added to coverage. NCM's preliminary analysis suggests that chemicals CBAM exposure could add USD 200–400M to India's annual CBAM liability.
India's government response to CBAM is still evolving. India has formally challenged CBAM at the WTO on grounds of discrimination against developing nations — but the WTO process is likely to take years and may not result in CBAM suspension. In parallel, the Ministry of Commerce and the Ministry of Finance are developing India's domestic carbon pricing response — with the carbon credit trading scheme potentially being designed to generate CBAM-equivalent domestic carbon costs that can be deducted from CBAM liability under EU rules. NCM is engaged with this policy development process and is providing technical input on the CCUS implications of different CBAM response designs.
The most important insight from NCM's CBAM analysis is that for India's steel and fertiliser sectors, CCUS investment can be commercially justified from CBAM avoidance alone — without requiring carbon credit revenue, government subsidies, or voluntary ESG premiums. This transforms CCUS from a climate expenditure into a market access investment with a calculable payback period.
For a 5 MT/year steel plant exporting 30% of production to the EU, the CBAM calculation is: 1.5 MT exported × 2.3 t CO₂/t steel = 3.45 MT embedded CO₂ × €70/t EU ETS = €241.5M annual CBAM liability. CCUS investment to reduce CO₂ intensity from 2.3 to 0.5 t/t steel on the exported production (post-CCS) reduces CBAM liability by €176M/year. At a CCUS capital cost of €400M and operating cost of €30M/year, the investment payback from CBAM avoidance alone is approximately 8–9 years. This is a positive business case without any additional revenue.
For fertiliser exporters, the combined CBAM avoidance and green urea premium creates an even stronger case. A 1 MT/year urea plant exporting 200,000 tonnes to Europe: CBAM avoidance value = 200,000 t × 2.8 t CO₂/t urea × €70 = €39.2M/year. Green urea premium = 200,000 t × USD 60/t premium = USD 12M/year. Combined annual revenue from CCUS investment: approximately USD 53M/year. CCUS capital cost for a 1 MT urea plant: USD 80–120M. Payback: 2–3 years. This is one of the strongest commercial CCUS business cases anywhere in the world.
Whether you are a government body seeking policy advice, an industrial company facing CBAM exposure, or an investor seeking CCUS project opportunities — our team is ready to engage.