EU carbon tax CBAM expansion to hit Indian MSMEs in 2028. Grid power is the bottleneck.

The European Union is expanding its Carbon Border Adjustment Mechanism (CBAM) to cover 180 additional steel and aluminium products starting January 2028. A new report from the Global Trade Research Initiative (GTRI) warns that by 2030, most industrial products entering the EU could face some form of carbon tax exposure. For Indian MSMEs, this is a direct threat because they rely almost entirely on grid power that is 80-85% coal based. Unlike large companies, small firms cannot set up captive renewable plants or easily wheel green energy to their factories. Industry bodies like FISME are asking the Indian government to provide green power to export clusters. But the challenges go beyond electricity. Most MSMEs lack basic emissions data, and the EU has rejected the use of international carbon credits for CBAM compliance. India's own Carbon Credit Trading Scheme (CCTS) has not yet started issuing credits under the compliance mechanism. With the first full CBAM financial declaration due in September 2027, Indian exporters have a narrow window to either cut emissions at source or get a domestic carbon price system accepted by the EU.