EU Carbon Tax Tightens

The European Parliament has voted to remove the “emergency brake” provision in the Carbon Border Adjustment Mechanism (CBAM). This change removes the option for EU member states to suspend the levy during periods of cost escalation, making its application automatic and continuous.

For Indian exporters, the implications are significant given its substantial exports of carbon-intensive products to the European Union. Exports of steel, aluminium, cement, and fertilizers will now be subject to uninterrupted carbon charges leading to higher compliance costs , particularly in sectors with higher emission intensity. Larger industries risk losing competitiveness unless they accelerate low‑carbon production strategies, while smaller exporters may face difficulties managing verification and reporting requirements.