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India urged to consider retaliation against EU carbon tax and protect its interests in global trade
EU’s proposed carbon tax and green initiatives could result in a 43% decline in India’s exports to the EU

In a recent report, the Global Trade Research Initiative (GTRI) has recommended that India consider implementing custom duties on certain European Union (EU) goods as a response to the Carbon Tax being imposed by the EU. The carbon tax, known as the Carbon Border Adjustment Mechanism (CBAM), is set to begin in January 2026, with compliance starting in October for carbon-intensive sectors such as steel, aluminium, fertiliser, and cement. India has previously responded to tariffs imposed by the United States on its steel and aluminium products by increasing its own duties on specific US goods.

The report suggests that the Indian government should consider renaming certain existing duties as carbon taxes in order to reduce the final tax paid by Indian companies in the EU. It argues that the EU’s rationale for implementing CBAM is flawed and may not effectively address climate change. The EU’s CBAM has three main goals: protecting local industries, generating revenue, and supporting a trillion-dollar subsidy initiative, even if it disrupts global trade. The report suggests that the EU’s motivation for CBAM is to raise funds for subsidies to its firms and farmers, including through the European Green Deal.

However, the UNCTAD Trade and Development Report 2021 predicts that CBAM will only reduce global carbon emissions by 0.1%. This raises questions about the effectiveness of the EU’s approach and underscores the importance for India to adopt a calibrated retaliation mechanism to respond to the EU’s carbon tax and protect its own interests in global trade.

One aspect that India should focus on is capturing industrial emissions. The upcoming EU legislation should restrict the use of industrial carbon capture and storage (CCS) technology to only truly unavoidable emissions. While CCS is included as one of the technologies in the European Commission’s proposal on the Net-Zero Industry Act, its target is not clearly defined, leading to the risk of it being used for too many purposes. By prioritizing the storage of unavoidable industrial process emissions, as suggested by the European Parliament’s ENVI Committee’s opinion on the NZIA, India can ensure that the use of CCS is appropriately limited and focused.

Examples from the steel and power sectors demonstrate that by focusing on end products, technologies can be developed to minimize or eliminate the elements that contain unavoidable CO2 emissions. This approach would not only help India reduce its carbon footprint but also ensure that its industries remain competitive in the global market.

However, the impact of the EU’s proposed CBAM and other green initiatives on India’s exports to the EU cannot be ignored. India’s exports to the EU are valued at $37 billion and several categories of India’s foreign trade are at risk, including textiles, chemicals, consumer electronics products, plastics, and vehicles, according to a report by the Centre for Energy, Environment, and Water. It is crucial for India to address this potential impact and explore ways to mitigate it.

The post India Urged to Respond to EU Carbon Tax, Capture Industrial Emissions, and Address Export Impact appeared first on Pinnacle Chronicles.

The post India Urged to Respond to EU Carbon Tax, Capture Industrial Emissions, and Address Export Impact appeared first on Pinnacle Chronicles.