Top govt officials, steel industry players to meet on Tuesday to discuss EU carbon tax issue

Top officials of different ministries, including finance, commerce and steel, and industry leaders from the steel sector are likely to meet on Tuesday to discuss European Union’s move to impose a carbon tax, sources said. The meeting will be held amid the carbon border adjustment mechanism (CBAM) being implemented by the European Union, which would hurt India’s exports of metals like iron, steel and aluminium products to the EU, they added. The meeting would be chaired by commerce secretary Sunil Barthwal.The EU is introducing CBAM from October 1 this year.

The new mechanism will translate into a 20-35 per cent tax on select imports into the EU starting January 1, 2026. The US, Canada, and other nations are also exploring similar mechanisms. According to a report from the economic think tank GTRI, from October 1, India’s iron, steel and aluminium exports to European Union countries will face extra scrutiny under the mechanism. From January 1, 2026, the EU will start collecting carbon tax on each consignment of steel, aluminium, cement, fertiliser, hydrogen and electricity.

In 2022, India’s 27 per cent exports of iron, steel and aluminium products worth USD 8.2 billion went to the EU.GTRI co-founder Ajay Srivastava said that the Indian industry must understand the diverse impact of the tax and prepare trade and low-carbon production strategies to promote exports. He said that the steel and aluminium sectors have high emission intensity and hence would attract high taxes.

The estimated tax for steel made from the blast furnace route is 39.6 per cent, and using an electric arc furnace is 19.8 per cent.The tax is zero if steel is made using green hydrogen as fuel and a reducing agent. Tax for iron ore pellet is 52.7 per cent, aluminium 20.3 per cent, Cement 90 per cent, and Urea 21.9 per cent, a GTRI report said. In the meeting, senior officials from ministries and private sector representatives from the steel and alloy sector are expected to participate.