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The Carbon Border Adjustment Mechanism (CBAM) poses significant challenges for India’s steel sector. With a lack of a distinct roadmap for decarbonization and high carbon emissions, the industry faces hurdles in meeting the requirements of CBAM. Moreover, competition from other developing nations and the potential for trade diversion and lower demand further compound the challenges. However, the level of preparedness for CBAM in India varies, with large-scale enterprises generally being more ready than medium and small-scale ones. Despite these challenges, the Indian government has shown a commitment to addressing the issues posed by CBAM through a target to reduce the average CO2 emission intensity of the steel industry.

The lack of a clear plan for decarbonization is a key challenge for India’s steel sector in relation to CBAM. While the country has set a carbon neutrality target for 2070, there is no distinct roadmap to achieve this goal. This raises concerns about the sector’s preparedness for CBAM, which requires companies to meet specific carbon emissions standards. Without a clear plan, it becomes difficult for the industry to align its operations with the requirements of CBAM.

Additionally, the steel industry in India is expected to double its production capacity by 2030, which could result in higher carbon emissions. The growth in production combined with the absence of a clear decarbonization plan poses a significant challenge for the sector in meeting the carbon standards set by CBAM. Without proper measures to reduce emissions, Indian steel may face barriers in international markets that have adopted stricter carbon regulations.

Moreover, India’s steel sector faces competition from other developing nations such as China, Brazil, and the ASEAN countries. These countries may have a better level of preparedness for CBAM, which could result in a shift in market share. If these countries can meet the carbon standards required by CBAM more effectively than India, it could lead to reduced demand for Indian steel exports and a potential trade diversion.

The potential trade diversion and lower demand for Indian steel exports may have a significant impact on the sector, despite India’s lower per capita emissions. CBAM aims to create a level playing field by ensuring that imports from countries that do not meet the same carbon standards as the EU face equivalent carbon costs. While India may have lower per capita emissions compared to some other countries, the implementation of CBAM could still affect its market position and export volumes.

In terms of preparedness, large-scale enterprises in the Indian steel sector are generally more ready for CBAM compared to medium and small-scale enterprises. These larger companies tend to have more resources to invest in carbon reduction technologies and sustainability initiatives. However, medium and small-scale enterprises in the sector need increased awareness of sustainability standards and the adoption of low carbon emissions practices in their production processes to be better prepared for CBAM.

When comparing India’s preparedness for CBAM with other competing exporter countries, India may face challenges. Other developing nations such as China, Brazil, and the ASEAN countries that are major players in the global steel market have been making significant strides in decarbonizing their industries. These countries have already implemented carbon reduction measures and have clearer roadmaps for decarbonization. This could give them a competitive advantage over India in meeting the carbon standards under CBAM.

However, despite the challenges, the Indian government has demonstrated a commitment to addressing the issues posed by CBAM. The government has set a target to reduce the average CO2 emission intensity of the steel industry. This indicates a proactive approach to improving the sector’s carbon footprint and aligning with the requirements of CBAM. By working towards this target, India aims to enhance its level of preparedness and competitiveness in the global steel market.

In conclusion, India’s steel sector faces several challenges in relation to CBAM, including a lack of a distinct decarbonization roadmap, high carbon emissions, competition from other developing nations, and the potential for trade diversion and lower demand. The level of preparedness for CBAM varies among exporters in the steel sector, with large-scale enterprises generally being more prepared. However, India may face challenges compared to other competing exporter countries. Nonetheless, the Indian government’s commitment to reducing carbon emissions in the steel industry demonstrates a proactive effort to address the challenges and improve competitiveness.

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