The European Parliament’s Committee on the Environment, Climate and Food Safety (ENVI) has proposed a draft to expand the European Union (EU) Carbon Border Adjustment Mechanism (CBAM) to cover a broader set of manufactured goods. The draft recommends the inclusion of about 180 additional steel and aluminium based products from January one, 2028. The proposed change would extend the carbon levy beyond raw materials and into finished and semi-finished items.

The report dated April 10 outlines the committee recommendation and notes that the measure requires approval by the European Parliament to take effect. If approved, the change is expected to raise costs for a wide range of Indian manufactured exports and will coincide with the planned implementation of a bilateral free trade agreement by the end of this calendar year. The move has been identified as a key point of negotiation between India and the EU.

Indian industry is preparing for potential impact on engineering exports, including auto components, machinery, fabricated metal products, pipes and fasteners as well as aluminium goods. Observers from the think tank GTRI have warned that most industrial products entering the EU could face carbon tax exposure by 2030. Exporters will need to factor carbon compliance into pricing and logistics decisions.

The draft also proposes tighter carbon accounting that would include emissions from pre-consumer scrap, a change that could erode the cost advantage enjoyed by scrap-based steel and recycled aluminium producers in India. Adjustments to accounting rules are intended to capture emissions hidden in inputs and processing and may reduce margins for firms relying on recycling.

Further scrutiny is proposed of indirect emissions from electricity use, which could materially raise compliance costs for manufacturers dependent on coal-based power. Industry associations and negotiators are likely to intensify assessments of supply chain emissions and to seek clarity on implementation timelines and safeguards.