As the EU prepares measures to implement its ambitious Action Plan to rescue and decarbonise its steel industry, India needs to assess the global impacts, policy lessons, and cooperation opportunities arising from Europe’s evolving strategy. The EU Carbon Border Adjustment Mechanism (CBAM) will have important implications for India’s steel sector, but it is only one part of the European strategy, and perhaps not the most impactful in the short term.
The European steel sector has declared an existential crisis. In response, the EU is preparing an ‘Action Plan to secure a competitive and decarbonised steel and metals industry in Europe’. This is a document that Indian steel stakeholders would be well advised to study: what are the likely impacts on India, and what examples might India consider for its own policies?
Germany’s Thyssenkrupp has serious profitability concerns and has announced layoffs of 11,000 people. In Europe, Arcelor Mittal has also seen profits decline, is delaying investments, and has announced layoffs of 600 employees in France. The sector faces a triple crisis: global overcapacity driven by China, rising energy costs, and the challenge of decarbonization. This is better characterised as a three-dimensional crisis, due to the tensions as well as synergies between its different causes. Not least of these tensions is that rising EU ETS carbon market costs and a not-yet-effective CBAM make the European steel industry hesitant to undertake any investments.
The Action Plan outlines how the EU thinks it can chart a way forward through the three dimensions of change. It is a comprehensive sectoral vision that integrates EU policies in the Clean Industrial Deal, the EU ETS domestic carbon market, CBAM, investment de-risking, the circular economy, and bans on scrap exports. It is shaping current work in Brussels to widen and strengthen the CBAM to cover emissions from upstream precursors and from electricity supply. It proposes measures to reduce industrial electricity prices via renewable energy PPAs, energy tax flexibility, and reduced network tariffs. It will form part of new rules on green product public procurement and green product ‘lead markets’, as well as state aid subsidies. By mid-2026, the Action Plan will result in legislation summarised as a “new long-term measure to maintain highly effective protection of the EU's steel sector”.
Crucially for India and Europe’s other global trading partners, the Action Plan emphasises the EU’s determination to develop its scrap-steel recycling potential into low-carbon/green steel production using electric arc furnace technologies. Europe plans to improve scrap collection from vehicles and to regulate to facilitate the easy flow of scrap steel between EU countries. Since May 2024, the EU has banned the export of waste, including iron and steel scrap, dross, and scalings. From July 2025, a customs surveillance system is monitoring all imports and exports of metal waste and scrap into and out of the EU.
All of this has knock-on effects for emerging markets and developing economies. The most immediate impact is the European onshoring of steel scrap, which will cripple opportunities for renewable-power-based electric arc furnace green steel to develop in growing markets such as India. Instead, India is likely to continue producing high-emissions-intensity steel using coal combustion. In short, despite the EU’s sincere climate commitment to emissions reduction, the likely—unintentional—result is increased emissions at the global level.
The EU is also pouring public money into finance for decarbonised steel investments. In just a few years, the EU and European countries have committed EUR 15.1 billion in direct capex financial support to low-carbon steel making. Germany accounts for almost half of the total subsidy. In addition, there are many other opex support schemes, such as carbon contracts for difference, a loan facility at the European Investment Bank, and green hydrogen support schemes. The Action Plan makes clear that this support will continue and be encouraged. Finally, the Action Plan also outlines plans to expand the EU’s research fund for coal and steel to include research on defence applications and to support technology deployment projects, including in the steel industry.
India needs to consider its response. As it stands, the EU Action Plan may hamstring important aspects of India’s steel decarbonisation strategy. On the other hand, it may also offer policy lessons that India could adopt and implement. For example, India is also focusing on improving scrap collection from vehicles. Unlike in Europe, the Indian steel sector has the considerable advantage of a growing domestic market.
A more ambitious response from India would be to insert bilateral cooperation on steel decarbonisation into the ongoing EU-India negotiations on a free trade agreement and (perhaps) a ‘green chapter’ in the future EU-India investment agreement negotiations. This approach could include collaborations in research, on financing, on access to green lead markets, and on scrap.
The European Commission President, Ursula von der Leyen, has announced that “Next-generation, clean steel should be manufactured in Europe. That means we have to help our steelmakers who are facing strong headwinds on the global market.” This unfortunately does not align very well with her statements about raising the EU-India partnership “to a higher-level” affirming “strong benefits for their peoples and for the larger global good.” It therefore falls to India to bring bigger and bolder ideas that can serve truly global outcomes. The window of opportunity to engage with the EU is now.
Professor Jesse Scott is a Senior Fellow at the Observer Research Foundation, as well as adjunct faculty at the Hertie School in Berlin since 2019.
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Professor Jesse Scott is a Senior Fellow at the Observer Research Foundation, as well as adjunct faculty at the Hertie School in Berlin since 2019. ...
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