Indian steel exports produced through conventional coal-based routes could face carbon-linked costs exceeding US$200 per tonne after 2034 under the European Union’s Carbon Border Adjustment Mechanism (CBAM), according to a new report by the India Energy & Climate Center (IECC) at the University of California, Berkeley.

The report, The Economic Case for Green Steel Production in India, argues that rising carbon-linked trade costs, combined with India’s growing dependence on imported coking coal, could significantly alter the economics of conventional steelmaking over the coming decade.

According to the analysis, CBAM-related costs on Indian blast furnace-basic oxygen furnace (BF-BOF) steel could begin at approximately US$91 per tonne by 2030 before rising sharply as the European Union phases out free allowances under its Emissions Trading System.

The findings arrive at a time when India is simultaneously expanding steelmaking capacity, increasing exports of value-added steel products, and evaluating long-term pathways for industrial decarbonisation.

CBAM shifts from climate issue to trade issue

The European Union officially entered the definitive phase of CBAM implementation on January 1, 2026. The mechanism places a carbon-linked cost on imported products such as steel, aluminium and cement to align imported goods with the carbon pricing faced by European manufacturers.

For India’s steel sector, the implications could become increasingly significant because the country’s steel production remains heavily dependent on coal-intensive blast furnace routes.

The IECC report notes that approximately 60–65% of India’s proposed future steelmaking capacity additions are still expected to rely on BF-BOF technology. These assets, researchers warn, could remain exposed to both imported coal volatility and future carbon-border costs throughout their operational life.

The report suggests that CBAM may gradually transform decarbonisation from a sustainability objective into a market access requirement for exporters.

Europe continues to remain an important export destination for Indian steel, especially for downstream and value-added products. As CBAM reporting requirements tighten and embedded emissions become increasingly scrutinised, carbon intensity could begin influencing export competitiveness more directly.

Green steel economics narrow sharply

One of the report’s most notable conclusions is that green steel pathways in India may approach cost competitiveness sooner than previously expected.

The study evaluates hydrogen-based direct reduced iron-electric arc furnace (H₂-DRI/EAF) steelmaking, which replaces imported coking coal with green hydrogen generated using renewable electricity.

Under the report’s 2030 projections, conventional BF-BOF steel production is estimated at around US$536 per tonne, while green steel production through H₂-DRI/EAF is projected at approximately US$562 per tonne — only around 5% higher.

However, the report argues that conventional production costs are highly vulnerable to imported coking coal prices and currency fluctuations.

India imports more than 90% of its coking coal requirements. Once historical coal price inflation and rupee depreciation are factored into production economics, the report estimates conventional BF-BOF steel costs could rise to nearly US$588 per tonne by 2030 — effectively making green steel the lower-cost pathway.

The analysis positions green steel not only as a decarbonisation strategy, but also as a hedge against imported fuel dependence and future trade-related carbon exposure.

Unlike coal-based production, hydrogen-based steelmaking could increasingly rely on domestically generated renewable electricity secured under long-term rupee-denominated contracts, potentially insulating producers from commodity price volatility.

India’s green steel policy ecosystem transition

India has already begun laying the groundwork for a green steel transition.

The government recently introduced a formal green steel taxonomy classifying steel based on emissions intensitythresholds. Discussions around green public procurement, carbon accounting and low-emission industrial manufacturing are also gathering momentum.

At the same time, exporters are increasingly preparing for stricter emissions disclosure requirements linked to CBAM compliance, traceability and embedded carbon reporting.

Long-term competitiveness may depend on transition speed

The broader significance of the IECC report lies in how it reframes India’s steel transition.

Rather than presenting green steel purely as an environmental imperative, the report positions it as a long-term industrial competitiveness issue shaped by trade regulations, import dependence and global supply-chain shifts.

For India, which is targeting major steel capacity expansion over the next decade, the technologies chosen today could determine exposure to future carbon-linked trade barriers and fuel import volatility for decades to come.

The report ultimately suggests that the question facing the sector may no longer be whether green steel becomestechnically viable, but whether India can accelerate the transition quickly enough before carbon-linked trade frameworks begin reshaping global steel markets more aggressively.