Mint Explainer: Is the EU's carbon tax an unfair ‘lagaan’?
New Delhi: The European Union’s much-debated ‘carbon tax’ on imported goods, which has industrial goods manufacturers worried about a potential dampening of margins on their exports, entered into a transitional phase on Sunday. The EU is seeking to impose this first-of-its-kind tax – called the Carbon Border Adjustment Mechanism – on the import of carbon-intensive goods as it looks to become a climate-neutral or net-zero carbon economy by 2050. European companies from seven carbon-intensive sectors – steel, cement, fertiliser, aluminium, iron, electricity and hydrogen products – will have to share data about their carbon emissions with the EU.
Importers will be required to send quarterly CBAM reports, and any neglect or misreporting will lead to stiff penalties. Mint delves into the complexities of the carbon tax and how well India is prepared for it. The CBAM is aimed at helping the EU achieve its goal of achieving net-zero emissions by 2050.
It looks to address the problem of “carbon leakage" – that is, carbon-intensive goods entering the EU through imports. With it, the EU is trying to make importers of such goods bear a burden equivalent to the costs of European producers. In other words, the EU is doing this to ensure that the EU industries don’t lose any competitiveness because of their transition to more sustainable ways of producing energy.
It will require the importers of carbon-intensive goods to buy enough CBAM certificates to cover the emissions embedded in their products. In doing so, it puts a ‘fair price’ on the carbon emitted during the production of such goods and encourages cleaner industrial production in non-EU countries. The gradual introduction of the CBAM is aligned with the phasing-out of the
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