India Cement Industry Faces Highest Carbon Border Adjustment Mechanism Risk

India’s cement industry is emerging as the most vulnerable sector to the European Union’s Carbon Border Adjustment Mechanism (CBAM), set to take effect in January 2026. With roughly 11.5 per cent of Indian cement exports destined for the EU and a high carbon-intensity per unit of output, companies are accelerating investments in low-carbon technologies and digital carbon accounting, aiming to convert regulatory pressure into a competitive advantage in global markets.

According to a report by Climate Finance Asia and the World Economic Forum, Indian cement exports carry a carbon-payment intensity of about 65 per cent per dollar of EU production or import, higher than Brazil and comparable to China and South Africa. This exposure places the sector at the forefront of industries likely to face significant CBAM costs once the levy becomes operational. Analysts note that proactive adaptation today could secure early-mover advantages, including premium pricing, stronger market share, and enhanced brand credibility.“Firms acting now are not just mitigating compliance risk, they are reshaping competitive dynamics in a decarbonising global economy,” said an industry expert. The study highlights that leading cement companies are integrating renewable energy, waste heat recovery, and digital carbon-accounting systems, while embedding internal or “shadow” carbon pricing into capital-expenditure decisions.

UltraTech Cement exemplifies this shift. With around 20 per cent of India’s domestic market share, the company has introduced an internal carbon price of $10 per tonne of CO₂, built over 1,000 MW of renewable energy capacity, expanded waste heat recovery infrastructure, and issued sustainability-linked bonds in US dollars to fund its low-carbon transition. These measures reflect broader trends across carbon-intensive sectors such as steel, mining, and oil and gas, where firms are strategically responding to emerging trade-linked carbon regulations.Policy developments in India support these corporate moves. The national Carbon Credit Trading Scheme, notified in 2024, is being phased in this year. While domestic carbon pricing could reduce CBAM liabilities, uncertainty remains regarding EU recognition, raising the risk of dual compliance costs. Moreover, indirect exposure is growing for firms that do not export directly to the EU, as multinational buyers increasingly enforce CBAM-aligned standards across global supply chains—a scenario particularly challenging for micro, small, and medium enterprises (MSMEs) with limited emission reporting capacity.

The report concludes that early adoption of low-carbon technologies and transparent supply chains allows Indian cement firms to turn CBAM from a regulatory burden into a strategic opportunity. Analysts suggest that aligning industrial practices with global sustainability standards not only mitigates financial risk but also contributes to India’s broader goals of climate-resilient, inclusive, and low-carbon urban development.

Also Read: Bengaluru Partners With Cement Factories To Reuse Plastic Waste Efficiently Statewide

India Cement Industry Faces Highest Carbon Border Adjustment Mechanism Risk