EU Carbon Border Tax: How Jindal Stainless, Vedanta Aluminium's sustainability initiatives bolster competitive edge
EU Carbon Border Tax: How Jindal Stainless, Vedanta Aluminium's sustainability initiatives bolster competitive edge
Earth’s surface temperatures are on the rise, prompting nations worldwide to take action to curb their carbon emissions. The European Union (EU) is no exception. In its efforts to reduce greenhouse gas emissions, the EU has introduced the Carbon Border Adjustment Mechanism (CBAM), a tool designed to ensure that carbon-intensive goods entering the EU pay a fair price for the emissions generated during their production. This mechanism is currently applicable to six categories of products--aluminium, iron and steel, hydrogen, electricity, cement, and fertiliser, irrespective of the product’s origin.
As CBAM is currently in a transition phase, companies importing goods into the EU must report their emissions. However, when CBAM fully comes into effect starting January 2026, it will also have significant financial implications. Consequently, Indian businesses, particularly those in the steel and aluminium sectors, have taken proactive measures.
For India’s largest stainless steel player, Jindal Stainless Limited, exports account for about 15% of sales volume, of which 40% are from Europe. This exposes the company to the impact of CBAM for the products it sells in the region. However, to stay competitive with other exporters of stainless steel to the EU region, Jindal Stainless has taken proactive steps to prepare itself for this challenge.
The company has been tracking and assessing the potential impact of CBAM on its operations for some time now. In addition to internal tracking and assessments, Jindal Stainless has also partnered with EU-based legal experts to prepare the company for the transition phase (reporting period) of CBAM. Additionally, the company is exploring options to integrate with SAP to streamline CBAM emissions calculations.
Abhyuday Jindal, MD, Jindal Stainless told Business Today, “We have been vigilant of our carbon footprint well before CBAM came into the picture. We started switching from thermal to renewable sources of energy--wind, solar, and hydro long ago. Recognising the challenges associated with decarbonising the stainless steel industry, we launched India’s first Green Hydrogen Plant in the stainless steel sector, which will reduce 2700 tCO2e of carbon emissions annually. Additionally, we are transitioning to electric vehicle fleets, upgrading to energy-efficient equipment, and incorporating the use of biofuels as part of our decarbonisation efforts.”
The company has also partnered with ReNew Power to set up 100 megawatt hybrid renewable energy round-the-clock project. They have installed 13.86 MWp rooftop solar power plant at Hisar and other service centers and a 7.2 MWp floating solar plant at its Jajpur unit. 30% of liquid fossil-fuels have been replaced with bio-LDO at the hot rolling mills of Hisar plant having an annual carbon reduction potential of 17,400 tCO2e.
“Apart from this, we have plans to invest Rs 700 crore in various sustainability projects aimed at reducing 1.5 million tonnes of carbon emission every year. In the last three fiscal years, we have reduced around 2.8 lakh tonnes of CO2. We now aim to generate over 1.9 billion units of clean electricity per annum through initiatives that have the potential to reduce carbon emissions by over 13.52 lakh tonnes per annum,” adds Jindal.
The initiatives undertaken by Jindal Stainless will contribute significantly to clean electricity generation and help in reducing carbon emissions.
Jindal Stainless is not alone. As CBAM applies to Aluminium Scope 1 emissions only, Vedanta Aluminium does not foresee any meaningful impact on its exports in the short- to medium-term. The company has been in complete compliance with CBAM reporting requirements over the last two quarters. It is progressively reducing greenhouse gas intensity through efforts such as integrating renewable energy into the power mix and expanding the usage of biofuels, achieving increased efficiencies in the smelting process, and deploying India’s largest fleet of electric forklifts across their operations.
John Slaven, CEO, Vedanta Aluminium told Business Today, “We are focusing on further diversifying our power portfolio through the increased use of renewable energy (RE) and sustainable alternatives such as biofuels. Towards fulfilling this aim, we have entered into long-term power delivery agreements to source an initial 1,335 MW of renewable energy. This will comprise a mix of both solar and wind energy, which will together contribute to powering Vedanta Aluminium’s operations across Odisha and Chhattisgarh. It will also result in a reduction of GHG emissions of ~3.2 million tonnes of CO2 per year, thereby contributing significantly to our decarbonisation efforts. In addition, we will deploy innovative new process technologies to decarbonise the value chain as and when they become commercially available.”
And beyond Scope 1 emissions, the company has low carbon Restora and Restora ULTRA brand products. As European customers are leading the field in terms of requiring low carbon primary products and even today are willing to pay a modest premium, Vedanta Aluminium will continue to allocate a large share of low carbon Restora and Restora ULTRA to meet the growing demand for these products in Europe adds Slaven.
Both Jindal Stainless and Vedanta Aluminium have already committed to reach net zero by 2050, and are actively working towards reducing their carbon emissions.
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