CBAM pushes global supply chains into a new era as Indian exporters brace for impact

The European Union’s Carbon Border Adjustment Mechanism (CBAM) is forcing the most significant redraw of global trade flows in more than a decade, triggering structural changes that are now reshaping sourcing decisions, carbon accounting practices, and logistics networks. As the world’s largest single market moves towards a carbon-priced future, companies across Europe, Asia and Africa are re-evaluating how supply chains should function under a regime where emissions carry a measurable financial cost

The Carbon Border Adjustment Mechanism (CBAM) is a landmark climate-policy tool introduced by the European Union to place a carbon price on selected imported goods and ensure that foreign producers face the same carbon-cost obligations as EU manufacturers. Designed to prevent carbon leakage, CBAM stops companies from shifting production to countries with weaker climate rules and promotes fair competition across global markets. It currently applies to six highly carbon-intensive sectors like iron and steel, aluminium, cement, fertilisers, electricity, and hydrogen with potential expansion to more products after 2026. Implemented in phases, CBAM began its transition period on 1 October 2023, during which importers must report embedded emissions without paying charges, and will move to full enforcement on 1 January 2026, when companies will have to buy CBAM certificates reflecting the emissions footprint of their imports. By holding non-EU exporters and EU importers accountable for carbon emissions, CBAM aims to reduce global industrial pollution, foster cleaner production methods worldwide and support the EU’s broader climate-neutrality objectives for 2030 and 2050.

The transition period for CBAM has already tested the preparedness of European importers and their overseas suppliers, but the definitive phase beginning on 1 January 2026 is bringing an entirely new level of urgency. Importers will need to purchase CBAM certificates to account for embedded emissions in carbon-intensive goods entering the EU. For exporters, especially those in India, China, Türkiye and Ukraine, the cost of non-compliance is no longer theoretical. It will directly shape market access, competitiveness and long-term viability in Europe.

India, China, Türkiye and Ukraine are among the most significant countries impacted by the EU’s Carbon Border Adjustment Mechanism because they are major suppliers of carbon-intensive goods such as iron and steel, aluminium, cement and fertilisers to the European market. China, as the world’s largest producer of steel and aluminium, faces the highest compliance burden, while India, with coal-dependent manufacturing must improve emissions reporting and cleaner production to remain competitive. Türkiye is deeply integrated with EU value chains, especially in steel, making CBAM a direct factor in its industrial competitiveness. Ukraine, historically a key exporter of steel and fertilisers to Europe, is expected to align closely with EU climate rules as part of its reconstruction and long-term integration plans. Together, these countries sit at the centre of how CBAM will reshape global supply chains and low-carbon industrial transitions.

Marc Bernitt, Senior Vice President, Customs,Europe, Middle East, and Africa (EMEA) and Asia Pacific (APAC) at Kuehne+Nagel, describes the shift as a turning point that requires a strategic mindset rather than short-term paperwork management. “Businesses that import goods covered by CBAM and exceed the exemption threshold have already undergone the transitional phase,” he says. “However, they were not yet obligated to purchase CBAM certificates during this period. Given the administrative complexity, many are still figuring out how to effectively handle these new obligations".

As the definitive phase is closing in as of 1 January 2026, it is increasingly important for businesses to adopt a strategic rather than reactive approach to CBAM compliance.
Marc Bernitt, Kuehne+Nagel

This strategic recalibration is not limited to Europe. Non-European exporters supplying the EU are under pressure to produce verified emissions data for products such as steel, aluminium, cement and fertilisers. The alternative, having the EU apply default emissions values, comes with significant financial consequences.

Bernitt says the data challenge is acute. “Non-European companies, including Indian exporters, face challenges in providing accurate product-level emissions data that is required as part of the CBAM obligations of their European customers. Failure to do so could result in the application of default values which typically are higher than actual emissions and lead to inflated costs and potential loss of competitiveness for importers into the EU.” To bridge this gap, the company has developed a joint solution with Climease that enables multilingual templates and secure data sharing.

ClimEase is a digital tool that helps companies easily calculate, track and report the carbon emissions of goods they export to or import into the European Union under the EU’s CBAM rules. It simplifies the complex CBAM reporting process by collecting data from suppliers, analysing emissions from production and automatically generating the reports required by the EU. ClimEase also helps businesses understand potential carbon-cost exposure once charges begin in 2026. The platform was founded in Switzerland, where ClimEase SA is headquartered.

Indian exporters step into a new compliance era
India, one of the largest exporters of carbon-intensive goods to the EU, sits at the centre of the CBAM debate. Steel and aluminium, two of India’s highest-volume export commodities, are among the earliest sectors to feel the financial weight of the carbon tariff.

Bernitt says the implications are concrete. “Based on EU default values and assuming they remain unchanged until 2034, the estimated cost increase for crude steel could reach 15% in 2026, rising to 51% by 2034. For aluminium, the increase is projected at 6% in 2026 and 17% by 2034. Knowing that, sourcing decisions are certainly evaluated and reconsidered, and suppliers that can offer less carbon-intense products may have a commercial advantage.”

Paras Rawal, Managing Director, India Subcontinent, CEVA Logistics, says the CBAM shift has already become a catalyst for transformation across carbon-intensive sectors in India. He explains that exporters are preparing with growing seriousness by undertaking emissions audits and refining production efficiencies.

According to Rawal, Indian companies are investing in precise emissions measurement, cleaner manufacturing practices and supply chain redesigns to reduce embedded carbon. “The EU’s CBAM is not just a compliance requirement. It is a catalyst for transformation. Indian exporters in carbon-intensive sectors such as steel, aluminium, cement and fertilisers are proactively preparing for this shift,” says the Rawal, adding that CEVA is supporting them in building resilient, sustainable supply chains.

Many exporters are conducting carbon footprint audits aligned to global standards such as the GHG Protocol and ISO 14064. Manufacturers are simultaneously investing in technologies such as hydrogen-based steelmaking, energy-efficient furnaces, carbon capture systems and renewable power sources to reduce Scope 1 and 2 emissions.

The GHG Protocol and ISO 14064 are two key tools used globally to measure and manage greenhouse gas (GHG) emissions, which cause climate change. The GHG Protocol, created by the World Resources Institute (WRI) and the World Business Council for Sustainable Development (WBCSD), provides clear guidelines for companies and organisations to calculate their emissions and report them in a standard way. It also classifies emissions into three types, Scope 1 are the direct emissions from owned sources, Scope 2 are the indirect emissions from purchased energy and Scope 3 are the other indirect emissions from the value chain. ISO 14064 is an international standard that complements this by giving detailed rules on how to measure, monitor, report, and verify GHG emissions at both organisational and project levels, ensuring that the reported data is accurate and credible. Together, these frameworks help organisations understand where their emissions come from, track them over time, and take action to reduce their impact on the environment.

The shift extends beyond factory operations. Exporters are redesigning logistics through route optimisation, shipment consolidation and deeper collaboration with service providers offering low-carbon solutions. India’s new Carbon Credit Trading Scheme, launched in 2024, is also emerging as a tool for cost-effective decarbonisation aligned to CBAM requirements.

We aim to make supply chains CBAM-ready and future-proof by helping exporters turn sustainability into a competitive advantage.

Paras Rawal, CEVA Logistics

European importers struggle with preparedness
While exporters scramble to build carbon-transparent operations, many European importers remain behind the curve. Bernitt says the readiness gap is broader than anticipated. “European importers’ readiness is mixed. This applies even to those who already submitted several quarterly reports during the transitional period of CBAM. For example, many importers still rely on default values rather than on accurate emissions data from their suppliers.”

Some businesses have only recently realised that CBAM applies to their imports. Others remain uncertain about internal governance, debating whether Sustainability, finance or customs functions should lead to compliance. Manual spreadsheets and non-integrated systems leave room for errors, inconsistencies and missing traceability.

“There is progress, but most companies are still in reactive mode rather than structured and strategic compliance mode,” Bernitt says. “This lack of readiness is concerning given the administrative complexity and financial risks involved.”

The logistics sector faces operational and financial pressure
CBAM introduces multiple operational risks for freight forwarders, carriers and exporters. The most immediate concern relates to import restrictions. If goods arrive in the EU without proper CBAM licensing, shipments can be delayed or denied entry.

Bernitt warns that this could have cascading consequences. “CBAM goods shipped to the EU without proper licensing conditions will face import restrictions. This is for example the case if importers have not registered timely as CBAM declarants. Importers relying on freight forwarders to fulfil their CBAM obligations may not have the right tools in place. This will have a knock-on effect on exporters. The worst case realistic scenario is an import stop leading to goods having to be shipped back to the exporting country.”

A shift in global trade flows begins to take shape
Beyond compliance management, CBAM is expected to reshape global trade routes in the coming years. Countries with cleaner power systems and strong carbon pricing regimes may gain a competitive advantage.

Bernitt notes that sourcing decisions are already evolving. “CBAM could lead to trade routes being reconsidered to favour countries with more sustainable energy mixes or existing carbon pricing systems. CBAM also demands verified emissions data from non-EU suppliers, pushing businesses to deepen partnerships and invest in carbon transparency.”

Industries that depend heavily on carbon-intensive materials such as construction and automotive will face rising costs tied to embedded emissions. As similar border carbon mechanisms emerge in the UK, Norway and other markets, the global trading system may gradually converge toward a carbon-accountable model.

India’s readiness compared to Vietnam and Indonesia
Rawal acknowledges a visible gap in readiness when comparing India to key Asian competitors. “Yes, there is a noticeable gap in readiness, and we see this in our engagement with exporters across the region,” says Rawal.

Vietnam has moved faster on emissions reporting and renewable energy adoption, bolstered by government-driven sustainability measures. Indonesia, while facing challenges similar to India, benefits from stronger regional cooperation in decarbonisation.

India’s slower adjustment is largely linked to its low carbon pricing structure and the dominance of MSMEs, which face resource constraints in carbon accounting. Rawal says CEVA’s support focuses on closing these gaps through accurate emissions data for EU shipments and low-carbon transport solutions.

The race for carbon accountability accelerates
CBAM is accelerating demand for verified emissions data, which is becoming as essential as certificates of origin in international trade. Digital tools and automated emissions tracking systems are gaining prominence.

Rawal says that CEVA is scaling its emissions reporting capabilities through MyCEVA booking-level carbon data, standardised and customised reports aligned to ISO 14083, an international standard that provides guidelines for quantifying and reporting greenhouse gas (GHG) emissions from transport operations and a CO₂ dashboard that provides analytics on emissions by route, mode and geography. These tools comply with the Global Logistics Emissions Council (GLEC) framework. CEVA’s Scope 3 emissions data is audited annually by KPMG, strengthening the accuracy and reliability required in CBAM compliance workflows.

Adapting for long-term competitiveness
For exporters preparing for the post-2026 world, Bernitt emphasises that compliance awareness must translate into action. “Exporters must understand that CBAM is first and foremost a compliance framework,” he says. “At the same time, CBAM puts an extra tariff on products increasing the so-called landed costs. Therefore, resorting to default emissions values due to not being able to provide accurate emissions data will lead to a loss of competitiveness.”

He adds that exporters in Asia Pacific must invest early in emissions data systems and low-carbon production solutions to safeguard market share in Europe. Technology partnerships and integrated emissions reporting will be vital tools in the years ahead.

Looking ahead
The next 18 months will be decisive. As CBAM shifts from reporting-only to full financial enforcement, companies that remain underprepared risk losing access to the EU market. Those that invest now will secure long-term commercial advantage.

Rawal says that collaboration will be the key. “Together, we can ensure Indian industry leads in the low-carbon economy.”

The message from logistics leaders is clear. CBAM marks the beginning of a new chapter in global trade in which carbon is no longer a soft sustainability metric but a core economic factor shaping competitiveness and future growth.