CBAM will cost India 0.03% of GDP – study

India’s GDP could decrease by 0.02–0.03% between 2025 and 2030 due to revenue outflow if the impact of the European CBAM is not mitigated by implementing a domestic carbon pricing system. This is stated in an analysis by the Centre for Social and Economic Progress (CSEP).

According to this scenario, the EU would collect about 5,500 crore rupees (€539 million) from Indian exporters in 2030.

The introduction of a domestic carbon tax plus CBAM would lead to a 0.01% increase in GDP in the following years, as part of the tax revenue would remain within the country, mitigating negative effects.

Although India’s exports to the EU affected by the mechanism account for only 0.2% of its GDP, 90% of this volume comes from ferrous metallurgy products, making the sector particularly vulnerable. Therefore, there are concerns that the European carbon tariff will increase production costs in key industrial sectors.

The researchers consider three scenarios.

In particular, the conclusions regarding fiscal revenues are as follows.

• Under the scenario with a domestic carbon tax (PCARBON), India receives significant revenues estimated at 1% of GDP by 2030.
• In the PCARBON + CBAM scenario, undistributed income amounts to 0.5% of GDP, which allows balancing economic challenges with compliance with European trade regulations.
• The CBAM scenario leads to a loss of revenue since the tax is fully transferred to the EU, causing negative economic consequences.

The researchers recommend allocating domestic carbon tax revenues toward “green” subsidies, industrial decarbonization, targeted compensation for households, as well as measures to diversify exports to markets outside the EU and improve energy efficiency.

According to refined estimates by GMK Center, in 2024, Ukraine exported $24.8 billion worth of goods to the EU, of which 14.5% falls under CBAM. This mainly involves iron, steel, electricity, aluminum, cement, and fertilizers. Analysts forecast that with the current structure, Ukraine’s potential export losses due to the mechanism in 2026–2030 will amount to $4.7 billion, with investment losses for the same period reaching $2.7 billion.