Europe no longer asks only what your aluminium costs. It now asks what the making of it emitted.
The EU’s Carbon Border Adjustment Mechanism (CBAM) spent October 2023 to December 2025 as a reporting exercise. From 1 January 2026 it became a money matter. Covered goods are steel, aluminium, cement, fertilisers, electricity and hydrogen. For aluminium the covered range is CN codes 7601 to 7616, which includes aluminium wire.
The EU importer buys the certificates, not the Indian exporter. But the cost does not stay with the importer. It comes back through price negotiation, and a lower realised export price is how the exporter pays.
CBAM cost = quantity in tonnes × embedded emissions per tonne × EU carbon allowance price × CBAM factor.
The certificate price was set at €75.36 per tonne of CO2 equivalent for Q1 2026. As an illustration only, take one tonne of aluminium with 14 tonnes of embedded CO2e (a placeholder, not a measured value; CRISIL’s 2023 estimate of the emission gap between Indian and European aluminium was 14 to 15 tonnes). At full phase-in that is about €1,055 per tonne.
In 2026 the payable share is small. The free allowances that EU producers receive are being withdrawn gradually through 2034, and the CBAM factor rises with them. Certificates go on sale in February 2027, and 2026 liabilities will not be fully known until the second half of 2027.
EU buyers pulled large volumes of unwrought aluminium into the final weeks of 2025 to clear customs before the definitive phase. The Rotterdam duty-paid premium was $343 a tonne in January 2026, barely above $330 at the start of December. That is a delay in the bill, not its removal.
The signs of strain were already visible. Indian aluminium and steel exports to the EU fell 24.4% in FY25 as buyers prepared. One study puts the annual cost to Indian exporters at up to €550 million by 2034.
Norway, Iceland and Switzerland are among the EU’s largest aluminium suppliers, and all three sit outside CBAM. The biggest driver of exposure is the electricity used in smelting. A smelter on hydropower carries a very different bill from one on coal. In 2023 CRISIL estimated that India produced 4.1 million tonnes of primary aluminium and exported 56% of it.
If an exporter cannot prove its emissions, the EU applies default values, which are set conservatively. Exporters with third-party verified data pay their actual carbon cost. Do not plan around offset credit for India’s domestic carbon pricing: EU recognition has not been confirmed. One analysis notes that the India-EU trade agreement contains a dedicated CBAM annexure, but it does not exempt exporters. The EU is also considering widening CBAM to more downstream aluminium products.
Think of a taxi meter hidden inside your invoice. It runs on emissions, not distance, and a cleaner route makes the fare smaller.
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