In IACM pipeline, output variables from a step are always passed as environment variables to later steps in the same stage, and a subset cannot be excluded (confirmed by Harness Support, ticket https://support.harness.io/hc/en-us/requests/132508).
In IACM, the apply step publishes Terraform outputs as output variables. When one output is 128 KB or more, a later Run step fails to start with:
fork/exec /usr/bin/sh: argument list too long
The later step never uses that output. The apply succeeds, but the pipeline shows as Failed.
So, The ask is a per-step setting to not inherit earlier steps' output variables as environment variables, or to inherit only an allow-list.