Key Highlights
- EU acknowledges India’s concerns over the Carbon Border Adjustment Mechanism (CBAM), a tax on carbon-intensive imports starting in 2026 (with a transition phase from 2023).
- EU claims CBAM is WTO-compatible, but is open to addressing specific concerns.
- EU unlikely to include CBAM in the Modi-von der Leyen talks on Friday, though India wants to raise the issue.
- EU Commissioner Wopke Hoekstra: 90% of companies may be excluded from CBAM.
Relevance : GS 2(International Relations)
India’s Concerns on CBAM
- Economic impact on Indian exports, particularly steel, aluminum, cement, and other carbon-intensive sectors.
- Potential trade barriers affecting India’s competitiveness in the EU market.
- Compliance burden for Indian companies, given CBAM’s strict reporting and carbon pricing requirements.
EU’s Stand
- While some concerns are considered “illegitimate”, the EU is willing to share experiences to facilitate implementation.
- Asserts CBAM is not protectionist but a climate action tool aligned with WTO rules.
Potential Implications for India
- Higher export costs for carbon-intensive sectors.
- Need for decarbonization investments to remain competitive.
- Possibility of negotiations or exemptions for Indian exporters.
Conclusion
- India is pushing for dialogue on CBAM’s impact, while the EU remains firm on implementation but open to discussions.
- Long-term solution: India may need to accelerate green energy transitions and explore carbon pricing mechanisms to mitigate trade risks.
