Context:
India is negotiating improved access to EU steel scrap under the proposed trade agreement to mitigate the impact of the Carbon Border Adjustment Mechanism (CBAM) on Indian metal exports and promote green steel production.
Key Highlights:
Trade & Policy Background
• CBAM, effective January 1, imposes carbon tariffs on imports exceeding EU emission benchmarks.
• Indian exporters fear CBAM may raise export taxes by 20–35%.
• EU recycling policies may act as non-tariff barriers, limiting scrap exports.
Green Steel Initiative
• India aims to raise scrap share in steel production to 50% by 2047.
• Focus on Electric Arc Furnace (EAF) technology.
• EAF route reduces:
- 1.5 metric tonnes CO₂ per tonne of scrap
- 75% energy consumption compared to blast furnaces.
Current Challenges
• Scrap accounts for only 20% of India’s steel feedstock.
• Domestic availability: approx. 25 Million Metric Tonnes (MMT) annually.
• Rising import dependency — ferrous scrap imports doubled between 2013 and 2023.
• Export restrictions by China and Russia have reduced global scrap supply.
Stakeholders Involved
• Ministry of Commerce & Industry
• Ministry of Steel
• European Union authorities
• Indian steel manufacturers
Significance / Concerns
• Highlights intersection of climate policy and international trade.
• CBAM may affect India’s export competitiveness.
• Increased scrap usage aligns with India’s Net Zero commitments (2070).
• Risk of over-dependence on imports amid global scrap shortage.
Relevant Prelims Points:
- Carbon Border Adjustment Mechanism (CBAM)
- EU’s carbon tariff on carbon-intensive imports.
- Targets sectors like steel, cement, aluminum, fertilizers.
- Electric Arc Furnace (EAF)
- Steelmaking process using scrap metal.
- Lower emissions than traditional blast furnace-basic oxygen furnace (BF-BOF) route.
- Non-Tariff Barriers (NTBs)
- Trade restrictions other than tariffs (quotas, standards, regulations).
- Green Steel
- Steel produced with significantly reduced carbon emissions.
Relevant Mains Points:
- International Relations (GS 2)
- Trade negotiations under India–EU Free Trade Agreement (FTA).
- Climate diplomacy and fairness in global carbon pricing.
- Economy & Industrial Policy (GS 3)
- Decarbonizing hard-to-abate sectors like steel.
- Balancing import dependency with domestic recycling ecosystem.
- Environment & Climate Action
- Transition to low-carbon industrial processes.
- Aligning trade policy with sustainability goals.
- Way Forward
- Develop robust domestic scrap collection & recycling ecosystem.
- Diversify import sources.
- Invest in green hydrogen-based steelmaking.
- Pursue WTO-consistent engagement on CBAM fairness.
UPSC Relevance:
GS 2 – International Relations (India–EU Trade)
GS 3 – Economy, Climate Change, Industrial Decarbonization
Prelims – CBAM, EAF Technology