RAS question
The EU's Carbon Border Adjustment Mechanism (CBAM) came into full financial effect from January 1, 2026. According to GTRI, by how much could Indian steel and aluminium exporters need to cut prices to remain competitive?
Correct answer: (D) 15–22%.
According to GTRI, Indian steel and aluminium exporters may need to cut prices by 15-22% to remain competitive in EU markets after CBAM's payment-linked stage begins.
Explanation
GTRI's estimate is 15-22%, because CBAM turns carbon content into a direct commercial cost for EU-linked trade from the first shipment of 2026. The levy is paid by EU importers, but the economic burden can be passed back to Indian steel and aluminium exporters through lower realised prices, stricter contract terms and tougher supplier selection. Cutting prices by 15-22% would allow EU buyers to absorb the carbon cost through their margins while keeping Indian suppliers competitive. The mechanism matters especially for carbon-intensive goods: steel, aluminium, cement, fertilisers, electricity and hydrogen are covered categories, and CBAM targets carbon-intensive imports.
Why the other options are wrong
- (A) A 5-8% cut understates the GTRI estimate and would not match the reported range needed to absorb the CBAM cost pressure.
- (B) An 8-12% cut is below the range GTRI reported for Indian steel and aluminium exporters facing CBAM-linked pricing pressure.
- (C) A 10-15% cut reaches only the lower edge of the reported burden and misses GTRI's stated 15-22% range.
Concept
External trade barriers and climate-linked regulation are part of the Indian Economy theme. Measures like CBAM connect exports, competitiveness and global environmental policy in RAS preparation.