Indian exporters supplying steel, aluminium, engineering goods, cement, fertilisers and other carbon-intensive products to the European Union are facing a new type of buyer requirement.
European customers are no longer asking only for product specifications, quality certificates, delivery schedules and prices. Many are now requesting information about factory emissions, electricity consumption, fuel use, raw materials, production routes and embedded carbon.
This change is being driven by the European Union’s Carbon Border Adjustment Mechanism, commonly known as CBAM.
The definitive CBAM phase started on 1 January 2026 after a transitional reporting period that ran from 1 October 2023 to 31 December 2025. Under the definitive system, eligible European importers must report embedded emissions and surrender CBAM certificates for covered goods.
For most Indian exporters, the legal obligation to file CBAM declarations remains with the European importer or its authorised representative. However, the importer cannot prepare an accurate declaration without technical information from the overseas manufacturer.
This makes CBAM more than an EU customs requirement. It has become a supplier-data, product-classification, production-record and commercial-readiness issue for Indian manufacturers.
A business that prepares its emissions data in advance can respond to buyers confidently. A business that waits until a questionnaire arrives may struggle to collect accurate information within the buyer’s deadline.
What Is CBAM?
CBAM is an EU carbon pricing mechanism for certain imported goods. Its objective is to apply a carbon cost to imports similar to the cost faced by manufacturers operating under the EU Emissions Trading System.
The mechanism is intended to reduce the risk of carbon leakage. Carbon leakage can occur when production moves from a country with stricter climate policies to a country where carbon costs are lower or not applied.
CBAM currently focuses on 6 major sectors:
- Iron and steel
- Aluminium
- Cement
- Fertilisers
- Electricity
- Hydrogen
The mechanism also covers selected precursors and certain downstream products falling under specified European Combined Nomenclature codes.
This means CBAM does not automatically apply to every product made from steel or aluminium. Applicability depends on the exact 8-digit CN code used when the goods enter the European Union.
For example, 2 products may both contain steel but may fall under different customs classifications. One may be included in the CBAM scope while the other may remain outside it.
The first step for every exporter is therefore product-classification screening.
Why CBAM Matters for Indian Exporters
An Indian exporter may not be responsible for buying CBAM certificates, but the European buyer may still depend on the exporter for most of the data required to calculate embedded emissions.
A typical buyer may request:
- Manufacturing installation details
- Production route
- Product weight
- Electricity consumption
- Fuel consumption
- Raw-material information
- Emissions related to precursor materials
- Direct emissions
- Indirect emissions
- Carbon price paid in India, where applicable
- Independent verification documents
If the exporter cannot provide reliable actual emissions data, the importer may use default values permitted under the CBAM framework.
Default values can simplify reporting, but they may be higher than the factory’s actual emissions. This can increase the importer’s expected CBAM cost and make the supplier appear more carbon intensive than a competitor with verified data.
CBAM can therefore influence supplier selection, pricing discussions, contract terms and long-term market access.
European buyers may start comparing suppliers based on 4 factors:
- Product price
- Quality performance
- Delivery reliability
- Embedded carbon intensity
Indian exporters that develop accurate data and demonstrate lower emissions may gain a commercial advantage. Those with weak records may face additional queries, delayed approvals or pressure to reduce prices.
Who Needs to Review CBAM Applicability?
CBAM screening should be considered by Indian businesses that manufacture or export goods connected with the covered sectors.
This includes:
- Steel manufacturers
- Aluminium manufacturers
- Foundries
- Forging units
- Casting units
- Pipe and tube manufacturers
- Fastener manufacturers
- Engineering-goods exporters
- Auto-component suppliers
- Fabricated metal-product manufacturers
- Cement companies
- Fertiliser manufacturers
- Merchant exporters sourcing from Indian factories
A merchant exporter may not own the manufacturing installation, but the European buyer may still request factory-level data. In such cases, the merchant exporter must coordinate with the actual manufacturer.
A trading company cannot normally prepare a reliable CBAM calculation only from purchase invoices and shipping documents. Technical production information is required.
The 50-Tonne Threshold
A major simplification introduced into the CBAM framework is an annual mass-based threshold.
For most covered goods in the cement, iron and steel, aluminium and fertiliser sectors, an importer may be exempt where its total annual imports remain below 50 tonnes.
However, the threshold is generally assessed at the level of the European importer and not separately for each supplier, product or shipment.
Consider an Indian exporter supplying 8 tonnes of aluminium products to a European buyer. The exporter may assume the shipment is below the 50-tonne threshold. However, the buyer may import another 70 tonnes from other countries during the same year.
In that case, the buyer may still fall under CBAM obligations.
Electricity and hydrogen are treated differently and do not benefit from the same general 50-tonne exemption.
Indian exporters should therefore avoid making their own conclusion based only on individual shipment quantity. The buyer or importer should confirm its CBAM status.
HS Code and CN Code Review
Indian exporters usually work with Harmonized System codes or Indian tariff classifications. CBAM applicability is assessed using the EU Combined Nomenclature code.
The CN code contains 8 digits.
The first 6 digits may be similar to the international HS classification, but the final digits can affect whether a particular product falls within the CBAM scope.
A correct classification review may require:
- Product description
- Material composition
- Manufacturing process
- Product dimensions
- Technical specifications
- End use
- Existing HS code
- Proposed EU CN code
- Buyer or customs-broker confirmation
A broad description such as “steel component” or “aluminium product” is not sufficient.
Before starting a detailed emissions calculation, the exporter should confirm that the product is actually covered.
This prevents the business from spending time and money calculating emissions for a product that may not fall within CBAM.
What Are Embedded Emissions?
Embedded emissions are the greenhouse gas emissions associated with producing a covered good.
Depending on the product and applicable methodology, embedded emissions may include direct emissions, indirect emissions and emissions linked with relevant precursor materials.
Direct Emissions
Direct emissions are generally generated within the production installation.
Examples include:
- Natural gas consumed in furnaces
- Coal used in production
- Furnace oil consumption
- Diesel used in process equipment
- Process emissions from chemical reactions
- Fuel used to generate heat or steam
Indirect Emissions
Indirect emissions may arise from electricity consumed during production.
The treatment of electricity emissions depends on the applicable CBAM rules, product category and calculation methodology.
An exporter should not assume that purchasing renewable-energy certificates automatically reduces CBAM emissions to zero. Renewable electricity claims must meet the relevant methodology and evidence requirements.
Precursor Emissions
Certain products are manufactured using CBAM-covered input materials or precursors.
For example, an Indian forging company may purchase steel billets from another manufacturer and process them into finished components.
The emissions associated with producing those billets may need to be included in the final embedded-emissions calculation.
This means the exporter may need data not only from its own plant but also from upstream suppliers.
Information Indian Exporters Should Prepare
A practical CBAM data file should include product details, manufacturing information, energy records, supplier data and supporting evidence.
Product Information
The exporter should prepare:
- Product name
- Commercial description
- HS code
- Proposed EU CN code
- Product weight
- Material composition
- Production route
- Manufacturing location
- Relevant input materials
- Export quantity
Manufacturing Information
The factory should document:
- Process flow
- Production stages
- Main machinery
- Production capacity
- Production output
- Scrap generation
- Rework quantity
- Opening and closing stock
- Installation boundaries
- Allocation between different products
Energy Information
The exporter may need:
- Monthly electricity bills
- Meter readings
- Captive-power generation records
- Fuel invoices
- Natural gas consumption
- Coal consumption
- Furnace oil consumption
- Diesel consumption
- Steam consumption
- Heat consumption
- Renewable-energy records
Raw-Material and Supplier Information
Procurement teams should identify:
- Major raw materials
- CBAM-covered precursors
- Supplier names
- Manufacturing locations
- Quantity purchased
- Supplier emissions data
- Supplier verification status
- Production route used by the supplier
Supporting Evidence
A calculation should be supported by documents such as:
- Electricity invoices
- Fuel invoices
- Production reports
- Purchase registers
- ERP records
- Meter logs
- Supplier declarations
- Process flow diagrams
- Mass-balance records
- Emission factors
- Calculation workbooks
- Internal approvals
- Verification reports
A number without supporting records may not be accepted as reliable actual emissions data.
Actual Values Versus Default Values
European importers may use applicable default values or actual emissions values when preparing CBAM declarations.
Default values reduce the immediate need for factory-level calculations. However, they may not reflect the real performance of the Indian manufacturing installation.
A plant using modern equipment, lower-carbon electricity or efficient production methods may have actual emissions below the applicable default value.
In such a case, preparing actual data may help the exporter demonstrate better carbon performance.
However, actual emissions should not be estimated casually. The calculation must follow the applicable CBAM methodology and may require independent verification.
The exporter should clearly distinguish between 3 types of figures:
- Preliminary estimate
- Internally reviewed calculation
- Independently verified actual emissions
A preliminary calculation should never be presented to the buyer as verified data.
CBAM Readiness Process for Indian Exporters
A structured preparation process can be completed in 10 practical steps.
Step 1 – Collect the Buyer Requirement
Obtain the buyer questionnaire, reporting deadline, product details and expected format.
Clarify whether the buyer wants:
- Basic product data
- Transitional-period information
- Definitive-period actual emissions
- A verified calculation
- A product carbon footprint
- General sustainability information
A product carbon footprint and a CBAM calculation are not always the same.
Step 2 – Confirm Product Classification
Review the HS code and proposed EU CN code.
Confirm whether the product falls within the CBAM scope before starting the technical calculation.
Step 3 – Identify the Manufacturing Installation
Map each exported product to the factory where it was manufactured.
Where production is split across 2 or more facilities, the business may need separate datasets or a carefully documented allocation approach.
Step 4 – Map the Production Route
Prepare a process flow showing:
- Raw-material receipt
- Heating or melting
- Forming or processing
- Machining
- Finishing
- Quality control
- Packing
- Dispatch
The process route determines which energy inputs and emissions are relevant.
Step 5 – Identify Data Gaps
Check whether the required electricity, fuel, production and supplier records are available.
Create a data-gap register mentioning:
- Missing document
- Responsible department
- Reporting period
- Required action
- Completion status
Step 6 – Collect Evidence
Collect records for a consistent reporting period.
Energy consumption and production output should cover matching dates. Using full-year electricity data with only 6 months of production data can distort the calculation.
Step 7 – Calculate Embedded Emissions
A qualified technical specialist should calculate direct, indirect and precursor emissions using the applicable methodology.
The calculation should explain:
- System boundary
- Reporting period
- Emission factors
- Allocation method
- Conversion factors
- Assumptions
- Data limitations
Step 8 – Complete Internal Review
Operations, finance, quality, procurement and management should review the calculation.
The review should confirm that production data matches invoices, records and exported quantities.
Step 9 – Prepare for Verification
Where actual emissions require verification, the exporter should prepare a controlled evidence file for the independent verifier.
The verifier may review source documents, calculation methods, internal controls and the manufacturing installation.
Step 10 – Submit Controlled Information
Only approved information should be shared with the buyer.
The exporter should avoid sending raw factory records without reviewing confidentiality, commercial sensitivity and contractual restrictions.
Internal Department Responsibilities
CBAM should not be assigned only to the sustainability team.
At least 6 departments may need to contribute.
Sales and Export
Sales should collect the buyer requirement, deadline, product details and commercial context.
The team should avoid promising verified emissions data before checking whether the required records are available.
Plant Operations
Operations should provide production routes, fuel use, electricity consumption, machinery information, output and scrap records.
Procurement
Procurement should identify precursor materials and obtain emissions information from suppliers.
Finance
Finance should provide electricity bills, fuel invoices, purchase records and evidence relating to any carbon price claimed as paid.
Quality and Compliance
Quality should maintain document control and ensure that information submitted to different buyers remains consistent.
Sustainability Team
The sustainability team should coordinate emissions methodology, data review, specialist support and reduction planning.
Management
Management should approve responsibilities, disclosure controls, confidentiality arrangements and investment priorities.
Common CBAM Preparation Mistakes
Indian exporters should avoid the following mistakes.
1. Assuming Every Steel Product Is Covered
CBAM depends on the listed CN code. Material content alone does not confirm applicability.
2. Using Corporate GHG Data as CBAM Data
A company-wide Scope 1 and Scope 2 inventory does not automatically represent the embedded emissions of a specific exported product.
3. Ignoring Precursor Emissions
A finished product may include emissions from purchased steel, aluminium or another covered precursor.
4. Mixing Reporting Periods
Production, energy and procurement data should cover the same period.
5. Using Unsupported Estimates
Estimated figures should be clearly identified and supported by a reasonable methodology.
6. Relying Only on Electricity Bills
Electricity consumption cannot be allocated accurately without production quantities and installation boundaries.
7. Waiting Until the Buyer Deadline
A complete data file may require coordination with suppliers, plant teams and independent specialists.
8. Sending Confidential Data Without Controls
Plant-level energy, production and supplier data may be commercially sensitive. Information should be shared through an approved process.
Case Study
An Indian manufacturer exports forged steel components to 2 customers in the European Union.
The products are manufactured using steel billets purchased from an Indian steel producer. The process includes billet heating, forging, machining, heat treatment and finishing.
The European buyer requests actual embedded-emissions data within 10 working days.
The company has monthly electricity and natural gas bills. However, it does not have separate meters for every production line. Production records are maintained in numbers of components, while raw-material records are maintained in tonnes.
The billet supplier has provided a general ESG statement but no verified emissions information for the billet.
The manufacturer initially considers dividing total annual electricity consumption by total factory production. However, this approach may not reflect the energy consumed by the specific exported product.
The company follows a more structured process.
First, it confirms the EU CN code with the buyer. Second, it maps the complete manufacturing route. Third, it converts component production into tonnes. Fourth, it reconciles billet input, finished output, scrap and rework.
The company then allocates electricity and natural gas consumption using a documented production basis. It also requests installation-level emissions data from the billet supplier.
All supporting documents are placed in an evidence register. The preliminary calculation is reviewed by plant operations, finance and quality before being sent for technical review.
The result is not only a response to one buyer. The company creates a repeatable process that can be used for future orders and additional European customers.
The case study shows that CBAM readiness depends more on data organisation and internal coordination than on completing a single questionnaire.
CBAM Timeline Businesses Should Know
The CBAM transitional period operated from 1 October 2023 to 31 December 2025.
The definitive phase started on 1 January 2026.
For goods imported during 2026, the first annual declaration is expected by 30 September 2027. The corresponding CBAM certificates must also be surrendered according to the applicable schedule.
CBAM certificate prices are linked to the EU carbon market. Published reference prices for the first 2 quarters of 2026 were around EUR 75 per tonne of carbon dioxide equivalent.
This does not mean an Indian exporter will automatically pay EUR 75 for every tonne of product exported.
The actual exposure depends on several factors:
- Embedded emissions per tonne of product
- Applicable free-allocation adjustment
- Quantity imported
- Eligible carbon price paid in the country of production
- Default or actual values used
- Applicable CBAM methodology
Businesses should avoid making unsupported claims about the exact CBAM cost without completing the required product-level calculation.
Business Risks of Poor CBAM Readiness
The EU importer generally carries the main regulatory responsibility. However, the Indian exporter can still face commercial consequences.
These may include:
- Delayed buyer approval
- Repeated compliance queries
- Use of higher default values
- Price renegotiation
- Additional verification cost
- Loss of preferred-supplier status
- Lower competitiveness
- Contractual disputes
- Inconsistent disclosures
- Pressure to reduce emissions
The most serious risk may not be a direct regulatory penalty in India. It may be the gradual loss of European business to suppliers that can provide reliable emissions data.
Final CBAM Readiness Checklist
Before responding to a European buyer, confirm that your company has:
- Reviewed the product HS code
- Confirmed the proposed EU CN code
- Identified the EU importer
- Checked the buyer’s reporting requirement
- Mapped the manufacturing installation
- Documented the production route
- Identified covered precursor materials
- Collected electricity records
- Collected fuel records
- Reconciled production quantities
- Converted product output into weight
- Requested supplier emissions data
- Created a data-gap register
- Prepared an evidence file
- Selected an allocation method
- Completed internal review
- Identified verification requirements
- Approved the buyer response
- Protected confidential information
- Prepared a carbon-reduction action plan
How Future Permits Supports CBAM Readiness
Future Permits helps Indian exporters understand CBAM requirements, complete preliminary applicability screening and identify product, data and documentation gaps.
Support may include:
- Initial CBAM applicability review
- Product and CN code readiness screening
- Buyer-questionnaire review
- Data-gap assessment
- Internal department coordination
- Emissions-data preparation
- Product carbon footprint readiness
- Verification-documentation readiness
- Specialist coordination
Technical emissions calculations, legal opinions, customs classification, verification and formal assurance may be handled by relevant independent specialists.
Future Permits does not issue CBAM approvals or guarantee acceptance by a European authority or buyer. Final applicability should be confirmed using the relevant product classification, regulation and transaction details.
Conclusion
CBAM is changing the way Indian exporters manage carbon information.
The immediate responsibility may sit with the European importer, but the quality of the importer’s declaration often depends on information supplied by the Indian manufacturer.
Exporters should begin with 3 priorities:
- Confirm the product’s EU CN code
- Map the manufacturing and supplier data
- Prepare an evidence-based emissions file
Businesses that start early can build a reliable system, improve buyer confidence and identify opportunities to reduce emissions.
Businesses that wait until a customer deadline may be forced to rely on incomplete records, unsupported estimates or default values.
👉 Need help checking whether your exports may fall under CBAM?
Future Permits can conduct a preliminary readiness review based on your product details, HS or CN code, manufacturing process and EU destination.