The European Union's plan to expand its Carbon Border Adjustment Mechanism (CBAM) is expected to significantly impact Indian exports, particularly in sectors such as engineering goods, auto parts, machinery, and fabricated metals. According to the Global Trade Research Initiative (GTRI), the expansion will increase carbon tax costs on these manufactured exports as the India-EU Free Trade Agreement nears implementation. Currently, CBAM applies to a limited range of imports including iron, steel, and cement. However, starting January 1, 2028, it will extend to approximately 180 additional steel and aluminium-based manufactured products. The EU will also tighten carbon accounting rules for scrap-based production, meaning emissions from steel and aluminium scrap will now be included in the final products' embedded emissions. Importers claiming to use lower-emission scrap will be required to provide verifiable proof of its origin, potentially disadvantaging many recycled-metal producers. Additionally, stricter anti-circumvention measures are being proposed, which could impose further reporting and verification requirements on importers suspected of under-reporting emissions or restructuring supply chains to evade CBAM.