How will the EU's Carbon Border Adjustment Mechanism affect the Cost Structure and Pricing Strategies of India's Aluminium Exports?

Ryan Wazz

ABSTRACT

The European Union’s Carbon Border Adjustment Mechanism (CBAM) mandates that EU importers declare carbon emissions embedded in goods, particularly from nations with less stringent carbon regulations. India, the EU’s largest trading partner, has a largely carbon-intensive economy, with its industrial base almost entirely reliant on fossil fuels (European Commission, 2023). The CBAM will significantly affect international trade as Indian exports of high-emission goods are poised to face carbon-related tariffs, reducing their overall competitiveness in the EU market. This study examines the CBAM’s impact on India’s aluminum exports to the EU and explores adaptive strategies to mitigate its vulnerability to CBAM-induced trade challenges. The research analyzes trade volume data in tonnes to maintain an accurate focus on trade flow patterns, eliminating price-related distortions. The study incorporates stakeholder insights and analyzes trade data from the International TradeMap, focusing on India's exports to the European Union, the rest of the world, and Japan (a non-EU country). It evaluates the direct implications of the Carbon Border Adjustment Mechanism and recommends policies to balance India's decarbonization efforts with the need to maintain trade competitiveness.

Keywords: Exports, Carbon-intensive, Tariffs, Pricing, Aluminium

How will the EU's Carbon Border Adjustment Mechanism affect the Cost Structure and Pricing.

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