India’s Export Challenge: Climate, Trade—or Survival?
India’s $825 billion export engine is on a collision course with global climate regulation. With carbon border taxes from the EU and UK set to take effect by 2026, over two-thirds of India’s exports are at risk of becoming uncompetitive unless industrial emissions fall sharply.
What was once a climate issue is now an urgent economic threat.
What’s at Stake?
According to the latest Net Zero Tracker data:
• Indian exporters face up to 20× higher carbon intensity penalties compared to EU-based competitors.
• Nearly 70% of India’s exports will be affected by emerging carbon pricing mechanisms.
• Carbon taxes could cost India billions in lost market access by the end of the decade.
At Risk:
• Global market access: CBAM (Carbon Border Adjustment Mechanism) in Europe will directly penalize high-emission imports.
• Trade competitiveness: Indian goods may be outpriced in premium markets.
• Investor confidence: Portfolio risk increases for companies not aligned with net-zero pathways.
Compounding the Challenge
India’s ambitious plans to expand steel capacity—critical for infrastructure and economic growth—may double industrial emissions unless clean technologies are rapidly deployed.
Export sectors most exposed include:
• Steel
• Cement
• Chemicals
• Fertilizers
• Pharmaceuticals
• Heavy equipment manufacturers
• Other heavy emitting sectors
Without urgent action, these industries could face regulatory walls and rising financial barriers globally.
What Must Change?
India must lead with climate-smart industrial reform. The following measures are non-negotiable:
• Fast-track Scope 1–3 decarbonization in industrial value chains
• Scale renewable energy, green hydrogen, and electric arc furnaces across heavy industries
• Leverage sustainable finance: green bonds, carbon credit markets, and ESG-aligned financing
• Adopt just-transition metrics and ESG assurance frameworks such as GRI 102/103 and BRSR standards
Why Now?
India is actively negotiating new global trade agreements. In this evolving context, climate alignment is not optional—it’s mission-critical.
Failing to decarbonize now could result in:
• Export losses of $35–45 billion annually by 2030, according to estimates by global think tanks
• Trade retaliation or loss of Most Favoured Nation benefits in climate-forward economies
• Investor flight from carbon-intensive manufacturing zones
Okaga’s Role in Export Decarbonization
At Okaga, we support manufacturers, exporters, and supply chains with:
• Renewable energy structuring (SuperCaptive and Open Access)
• Carbon footprint assessments and Scope 1–3 mitigation planning
• ESG reporting and compliance readiness (BRSR, GRI, CBAM alignment)
• Green finance solutions and carbon credit advisory
We help you meet international buyer expectations—while protecting your long-term margins.
Let’s Strategize Together
How prepared is your business to survive the carbon cost era?
• Is your supply chain climate-aligned?
• Do you know your carbon intensity benchmarks for EU trade?
• Are you investing in clean energy or transition pathways?
If you’re unsure, Okaga can help. Let’s build a climate-resilient, trade-ready strategy together.
Additional Resources
1. India Export Exposure to CBAM
• Over two-thirds (~67 %) of India’s exports ($824.9 b in 2024-25) face exposure to carbon border taxes in EU/UK markets from 2026
ScienceDirect+15Reuters+15The Economic Times+15
• The EU and UK constitute $9.5 b worth in CBAM-affected sectors
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2. Carbon Penalty Risk: Relative Burden by Country
• India faces the highest relative CBAM cost burden globally—around 20 × that of US competitors due to high carbon intensity and export reliance
Climate Leadership Council+2Mongabay-India+2
3. India Carbon Intensity vs EU Benchmarks
• India’s grid emissions intensity is 632 g CO₂/kWh in 2022, about 3.5 % improved since 2018
azbpartners.com+3Climate Home News+3worldbank.org+3
• Indian iron & steel units emit ~2.54 t CO₂ per tonne of crude steel, versus a global average of ~1.91 t CO₂/t
4. CBAM Tax Burden on Indian Steel Exports
• CBAM could result in 25% carbon tax on steel exports to the EU, adding €173.8/tonne—~16% of unit export value (2022 pricing)
Carbon Credits+8SPRF+8Mongabay-India+8
• ICRA projects profit erosion of USD 65–160/mt for Indian steel in EU from 2026 to 2036
• India exported $13 b in iron & steel (FY 2022-23), with 23.5 % destined to EU markets
5. Macroeconomic Impact Estimate
• CBAM could cost India up to 0.05 % of GDP, equivalent to $4–5 b annually