How India can counter the EU’s carbon tax
The government is reported to be mulling various strategies to deal with the European Union’s Carbon Border Adjustment Mechanism, or C-BAM. Here is what the government should do: present the EU with a Carbon Dioxide Removal Obligation (CDR-O) tax on imports from the economic bloc, with a provision for setting off C-BAM against CDR-O levies. The EU sees itself as the global leader in fighting climate change.
Its enterprises have to pay a carbon tax on the amount of carbon dioxide (or equivalent amounts of other greenhouse gases) they generate. This places EU companies at a competitive disadvantage when confronted with imports from countries that do not have a carbon tax. The EU has devised C-BAM to neutralise this disadvantage.
While it sounds confusingly like a character from The Flintstones, its underlying idea is simple. When someone in the EU imports goods in any of five emissions-intensive sectors from an economy without carbon pricing, the importer will have to buy C-BAM credits equivalent to the tax an EU producer would pay on the carbon content of that import. C-BAM kicks off with the requirement, from October this year, that imports be accompanied with detailed accounting of their carbon content.
From January 1, 2026, C-BAM credits will have to be added to the cost of imports. Indian industry is quite concerned, especially the emissions-intensive sectors of cement, iron and steel, aluminium, fertilisers and electricity. After ditching the idea of countering this at the World Trade Organisation, the government is now thinking of more creative ways to counter C-BAM.
Read more on livemint.com
