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An Indian steelmaker and the EU carbon border charge
You run the case. Read the prompt, answer questions from the notes below, and share data only when the candidate asks for it or gets stuck. Score at the end.
Case timer
00:00
1. Read the prompt aloud
Read it slowly, then pause. Let the candidate ask questions before they structure.
An Indian steelmaker exports to the EU. Its steel carries about 2.5 tonnes of CO2 per tonne of steel. How exposed is it to the EU carbon border charge, and what should it do?
Format note: Candidate-led: you drive; the interviewer answers what you ask. All figures are illustrative.
2. Answers to clarifying questions
Give these answers only if the candidate asks. If they ask something not listed, give a sensible answer or say it does not matter here.
If asked: How much steel goes to the EU, and at what price and margin?
Answer: 200,000 tonnes a year at EUR 600 per tonne, with a margin of about 10 percent.
If asked: How is the border charge calculated?
Answer: Look at full phase-in, due in 2034: the importer pays the EU carbon price, assume EUR 80 per tonne, on all the CO2 embedded in the steel, minus any carbon price already paid in India, which you can assume is zero. Until then a shrinking deduction linked to EU free allowances lowers the charge. The real rules have more detail and may change.
If asked: Who pays in practice?
Answer: The EU importer pays, but expects the exporter to share the cost through lower prices.
3. The hypothesis a strong candidate states
Listen for an early, testable guess like this one. It does not need to match word for word.
Steel made in blast furnaces carries a lot of carbon. My hypothesis is that the border charge, once fully phased in, would be larger than the whole margin on EU exports, so the company must either cut emissions on that steel or sell it elsewhere.
4. A model structure
Compare the candidate's structure with this one. A different split can be just as good if it is clean and fits the problem.
- Size the charge, compare with margin, and test the optionsThis comes from charge = tonnes sold to the EU x CO2 per tonne x carbon price, compared with the margin on those sales.
- Charge per tonne and in total
- Key: Charge versus margin on EU sales
- Options: cut emissions, pass on cost, sell elsewhere
5. The working, step by step
Each step shows how a strong candidate works it out. Share a new fact from it only when the candidate asks or is stuck, and let them do the math: the result in the dark box is what they should reach.
Step 1: Charge per tonne of steel
What a strong candidate does: Candidate: "At full phase-in the charge applies to all 2.5 tonnes of embedded CO2, at EUR 80 each:"
Charge (EUR per tonne of steel): 2.5 × 80 = 200
Step 2: Total yearly charge
What a strong candidate does: 200,000 tonnes exported to the EU.
Charge (EUR a year): 200,000 × 2.5 × 80 = 40,000,000
Step 3: Compare with margin
What a strong candidate does: Candidate: "What do we earn on EU sales today?" Interviewer: "About 10 percent of EUR 600 per tonne." The charge is more than three times the whole margin.
Margin on EU sales (EUR a year): 200,000 × 600 × 0.1 = 12,000,000
Step 4: Option: lower-carbon route
What a strong candidate does: Candidate: "Is there a lower-carbon way to make the EU volume?" Interviewer: "An electric arc furnace using scrap would emit about 0.6 tonnes per tonne of steel and cost EUR 150 million." Candidate: "It would still pay the charge on 0.6 tonnes, EUR 48 per tonne of steel:"
Remaining charge (EUR a year): 200,000 × 0.6 × 80 = 9,600,000
Step 5: Yearly benefit
What a strong candidate does: Interviewer: "EU buyers would also pay about EUR 30 per tonne more for low-carbon steel." The charge saved plus the premium:
Yearly benefit (EUR): 200,000 × (2.5 - 0.6) × 80 + 200,000 × 30 = 36,400,000
Step 6: Payback
What a strong candidate does: Investment divided by the yearly benefit.
Payback (years): 150,000,000 ÷ 36,400,000 = 4.12
The recommendation to listen for
At the end, say: "The CEO walks in. What is your recommendation?"
I recommend that the steelmaker plan now for a lower-carbon route for EU sales. First, once fully phased in, the border charge of about EUR 40 million a year would be more than three times the EUR 12 million margin on EU exports. Second, a scrap-based electric arc furnace cuts the charge to about EUR 9.6 million and earns a green premium, a benefit of about EUR 36.4 million a year and a payback of about 4.1 years. Third, the charge phases in until 2034, but steel this carbon-heavy pays on its emissions above the EU benchmark from the start, so the time to build is shorter than the end date suggests. Model the charge year by year.
Risks a strong answer names: Border-charge rules, deductions, and the phase-in schedule may change; Scrap supply and electricity prices affect the new furnace's cost; EU buyers may not pay the full green premium.
Next steps: Model the charge year by year under the current phase-in schedule; Secure scrap supply and a power contract for the new furnace; Talk to the top EU buyers about low-carbon steel contracts.
Strong versus weak
A strong answer
Sized the charge, compared it with margin, and tested a lower-carbon option with payback and phase-in timing.
A weak answer
Said the charge "is the importer's problem" and ignored that it would be passed back through price.
Score the candidate
Score each criterion from 1 to 5. A 2 or a 4 sits between the descriptions.
This case has no exhibit. Score Exhibit reading on how the candidate used the data you gave them: did they pick out the number that matters and say what it means?
Total
0 out of 25
Score all five criteria to see the band and the feedback template.