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CBAM and India: Climate Policy Perspectives



  Dec 22, 2023

CBAM and India’s Position



What is CBAM?

The Carbon Border Adjustment Mechanism (CBAM) is a tax imposed on imports of goods from countries that do not have carbon pricing mechanisms. It aims to prevent carbon leakage and encourage cleaner production processes by putting a carbon cost on imports.

When was CBAM implemented?

CBAM was initiated on October 1, with initial steps focusing on carbon emissions reporting requirements for imports.

What is the timeline for CBAM’s full implementation?

From 2023 to 2026, there is a transition period during which emissions reporting is required. The actual tax component of CBAM is set to be imposed by the EU starting in 2026.

How does CBAM affect India?

CBAM affects India by potentially imposing a tax on its exports to the EU and UK, particularly targeting sectors like iron, steel, and aluminum. These sectors are significant for India’s economy, with exports worth $8-$9 billion at risk of becoming less competitive due to the carbon tax.

What is India’s stance on CBAM?

India opposes CBAM, challenging it at the World Trade Organization (WTO) as discriminatory and violative of the principle of common but differentiated responsibilities. India is seeking ways to mitigate the impact on its exports, including exploring compensation for affected exporters.

What measures is India considering in response to CBAM?

India is considering a range of relief measures to remain competitive in the global market, such as seeking longer transition times and exploring mechanisms to offset the duties imposed by CBAM.

What are India’s concerns about CBAM?

India’s main concern is that CBAM may undermine its trade interests, particularly in sectors vital for its economy. India also argues that CBAM could defeat the objective of differentiated responsibilities among nations in terms of environmental impact.

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