As the EU gears up to impose carbon tariffs on high-emission imports, green steel producers are set to benefit from this shift. The Carbon Border Adjustment Mechanism (CBAM), introduced under the European Green Deal, will require importers to purchase credits to offset emissions from imported steel, aluminum, cement, and other products from 2026, with full levies phased in by 2034. This policy targets emissions-heavy industries, including steel, which accounts for 7% of global carbon emissions.

Meranti Green Steel, a Singapore-based company, is constructing a $2 billion electric arc furnace in Rayong, Thailand, to meet Europe’s growing green steel demand. Set to produce 2.5 million metric tons annually by 2028, Meranti's plant aims to produce steel with a carbon footprint of 600 kg per ton, well below the 2,000 kg associated with traditional coal-fired production. The company has already secured several EU-focused agreements, positioning itself to supply a market that may see a green steel shortage of over 20 million tons by 2030.

The CBAM policy is driving established players like India’s JSW Steel to expand their low-emission operations. JSW is building a 4-million-ton green steel facility on India’s west coast, with plans to source renewable energy and use recycled materials to meet future CBAM standards by 2034.

While CBAM could spur more low-emission production, it has also sparked concerns over a "two-tier" market, where companies might produce cleaner steel solely for the EU while continuing higher-emission production elsewhere. This system, however, may tighten as more countries consider carbon tariffs, with the UK planning its own version by 2027 and Canada, Australia, and the U.S. weighing similar policies.

In response to CBAM, countries are boosting electric arc furnace projects to cut emissions. China is building 18 new furnaces to replace older plants, and India is constructing six, while Japan and South Korea remain more resistant. Despite initial opposition, India’s industry leaders now view CBAM as an opportunity to strengthen climate policies and adapt to the evolving carbon tax landscape globally. 

(ET)