Commerce and industry minister Piyush Goyal has criticized the European Union’s carbon border tax and steel import restrictions, warning that the measures could make European manufacturers less competitive and raise costs for consumers.

Speaking at the Berlin Global Dialogue on Thursday, 22 October, Goyal said Europe’s efforts to protect domestic industries risked making essential industrial inputs more expensive.

“Europe is shooting themselves in their own feet,” he said, referring to restrictions on steel imports, the Carbon Border Adjustment Mechanism (CBAM) and deforestation regulations.

Goyal questioned the logic of raising the cost of imported materials when European manufacturers need competitively priced steel, aluminum and other inputs.

“I would love to have high-tech products from Europe, your electrolyser coming to help me make green hydrogen, help me make green steel at much better prices,” he said.

“But you put a CBAM on yourself, you put a 50% duty to bring steel into your country, you are inviting disaster.”

His remarks came during an official visit to Germany and the Netherlands from 22 to 27 October, accompanied by a delegation of Indian businesses and startups.

Why India opposes the carbon levy

CBAM is designed to impose a carbon cost on certain imports comparable to the cost faced by manufacturers operating under the EU Emissions Trading System. The mechanism covers six sectors: iron and steel, aluminum, cement, fertilizers, electricity and hydrogen.

Its definitive phase began on 1 January 2026 following a transitional reporting period that started in October 2023. Financial obligations are being phased in as the EU gradually withdraws free carbon allowances for domestic producers.

Brussels argues that the mechanism prevents carbon leakage, where companies shift emissions-intensive production to countries with weaker climate regulations.

The European Commission has maintained that the system treats imported and domestically produced goods on comparable terms and encourages manufacturers outside the EU to reduce emissions.

India sees the policy differently.

Indian steel and aluminum producers rely heavily on carbon-intensive energy, leaving them exposed to additional costs when exporting to Europe. Companies must also meet emissions reporting and verification requirements.

The burden is particularly significant for steel. India’s average emissions intensity in steel production has been estimated at 2.54 tonnes of carbon dioxide per tonne of steel, compared with a global average of about 1.9 tonnes.

Higher emissions can translate into greater CBAM liabilities, although the actual amount depends on verified production emissions, applicable EU rules and carbon prices already paid in the country of origin.

New Delhi has also argued that climate-related trade measures should recognize differences in countries’ development levels and historical responsibilities for emissions.

That argument draws on the principle of common but differentiated responsibilities, under which developing economies should not be expected to bear identical obligations to wealthier industrialized countries.

Steel restrictions add to concerns

The EU introduced a revised tariff-rate quota system in July 2026, limiting the volume of certain steel products eligible for duty-free access. Imports exceeding applicable quotas face a 50% tariff.

The two measures operate differently. CBAM addresses embedded carbon emissions, while the steel quota system restricts imports to protect European producers. For manufacturers dependent on imported steel, however, the combined effect could be higher sourcing costs and fewer competitively priced alternatives.

European steelmakers have argued that stronger trade protections are necessary to counter global overcapacity and competition from lower-cost producers. Goyal’s position is that protecting upstream industries through trade barriers could impose costs on downstream manufacturers, including machinery, automotive and engineering businesses.

The disagreement comes as India and the EU move toward implementing their free trade agreement.

Goyal indicated that the agreement could be signed before the end of 2026 and become operational in early 2027, subject to the necessary approval procedures.

The agreement is expected to expand market access and reduce tariffs across a range of products, but it does not automatically eliminate obligations under CBAM.

India and the EU have discussed cooperation on carbon pricing, emissions measurement and industrial decarbonization. The European Commission has previously acknowledged the compliance challenges faced by Indian businesses and committed to continued technical engagement.