EU’s CBAM to Impose 25% Tax on Indian Exports

The European Union's Carbon Border Adjustment Mechanism (CBAM) is set to impose a 25% tax on energy-intensive goods exported from India to the EU, according to a report released on Wednesday. The report, titled "The Global South's Response to a Changing Trade Regime in the Era of Climate Change" by the independent think tank Centre for Science and Environment (CSE), highlights that this tax would represent approximately 0.05% of India's GDP.

Details of the Tax

The CBAM is a proposed tax by the EU targeting energy-intensive products like iron, steel, cement, fertilizers, and aluminum imported from countries including India and China. The tax is calculated based on the carbon emissions associated with the production of these goods.

EU's Rationale

The EU argues that CBAM aims to level the playing field between domestic manufacturers, who must meet stringent environmental standards, and foreign producers. It is also intended to reduce emissions from imported goods.

Concerns and Debate

However, the mechanism has raised concerns among developing countries, who fear it could negatively impact their economies and make trading with the EU more costly. The issue has sparked debate at multilateral forums, including UN climate conferences, where developing nations argue that such measures may contradict UN climate change rules that prohibit dictating how other countries should manage their emissions.