It also said that several studies assessing the EU’s Carbon Border Adjustment Mechanism (CBAM) identify African and Asian countries as the “most” vulnerable to its effects.
CBAM (or carbon tax), is aimed at preventing carbon leakage and will apply to high-risk imports such as cement, iron and steel, aluminium, fertilizers, electricity, and hydrogen starting January 2026.
It requires the purchase of CBAM certificates, reflecting the carbon emissions linked to these goods.
For India, the iron and steel industry, representing 23.5 per cent of its EU exports, faces the highest exposure under CBAM, it added.
“Indian firms may incur tariffs of 20-35 per cent, leading to higher costs, reduced competitiveness, and lower demand in the EU market. Additionally, compliance costs will rise due to the need for detailed emissions reporting,” the report said.
The European Union (EU) is India’s second-largest trading partner.
In 2023-24, the EU accounted for 17.4 per cent (USD 76 billion) of the country’s total exports.