A new report argues that green hydrogen could reframe the European Union's Carbon Border Adjustment Mechanism (CBAM) — widely seen as a trade barrier — into a catalyst for low-carbon industrial expansion and deeper India-EU value chains. The findings, published by European Times, come as New Delhi and Brussels enter a phase where trade policy, industrial competitiveness, and climate commitments are increasingly converging.

What CBAM Means for India

CBAM entered its definitive regime on 1 January 2026, covering iron and steel, aluminium, cement, fertilisers, electricity, and hydrogen. The mechanism places a carbon cost on embedded emissions in covered imports, creating a direct incentive for producers outside Europe to reduce their carbon intensity.

For India, the stakes are particularly high. The country's National Steel Policy targets crude-steel capacity of 300 million tonnes and production of 255 million tonnes by 2030–31 — a scale of industrial expansion that, under CBAM's current framework, carries significant carbon-cost exposure.

Green Hydrogen as the Bridge

The report positions green hydrogen as the critical link between India's development ambitions and Europe's decarbonisation requirements. 'Green hydrogen is particularly important because it can replace fossil fuels in industrial processes that are difficult to electrify directly,' the publication noted.

Rather than scaling conventional steel capacity and retrofitting it later, the report urged India to build clean industrial infrastructure — including hydrogen-based direct reduced iron (H₂-DRI) plants — from the ground up. This approach, it argued, would allow India to sidestep future carbon liabilities while positioning itself as a competitive clean-industry supplier to Europe.

India's Green Hydrogen Targets and Progress

India has set a target of 5 million tonnes per annum (MTPA) of green hydrogen production capacity by 2030. Progress is already under way: 15 companies have been awarded 3,000 MW per year of electrolyser manufacturing capacity, and 18 companies have received incentives covering 8,62,000 tonnes per annum of green hydrogen production capacity.

The report stressed that the success of any India-EU clean industry partnership would ultimately be measured in 'installed electrolysers, contracted tonnes of green hydrogen, commissioned H₂-DRI plants and recognised carbon certificates — not just by number of declarations signed.'

Trade Context: FTA and Bilateral Flows

The conclusion of EU-India Free Trade Agreement (FTA) negotiations in January 2026 has created a broader platform for closer economic ties. Bilateral goods trade currently stands at approximately $136 billion, with India running an estimated $15 billion surplus. The FTA, combined with CBAM compliance pressure, gives both sides a structural incentive to align on clean-technology supply chains.

The Opportunity Ahead

According to the report, India's vast renewable energy potential and expanding industrial base offer Europe a chance to build new clean-technology supply chains outside of China. 'With breakthroughs in India and Europe's clean energy ecosystem by the end of this decade, the energy transition could become more than a climate project. It could become the foundation for a new, cleaner and more competitive India–EU industrial partnership,' the publication said.

Whether that vision translates into contracted capacity and verified carbon reductions — rather than policy declarations — will define the partnership's real impact in the years ahead.