Upcoming India-EFTA free trade pact to miss carbon tax discussions
NEW DELHI, MUMBAI : The proposed free trade agreement between India and the European Free Trade Association is unlikely to address the issue of carbon tax—a key concern for domestic steelmakers looking to export to Europe. The two trading partners will instead address the issue through a separate pact later, two government officials told Mint. EFTA and India are likely to sign a free trade pact on Sunday, these officials said.
India and EFTA began negotiations for a trade treaty in 2008. A carbon tax proposed by European countries—the carbon border adjustment mechanism, or CBAM—is perceived to be a trade handicap for Indian steelmakers looking to export steel to the region. CBAM seeks to levy a carbon tax on imports of iron and steel, aluminium, cement, ceramics, fertilisers, glass, and hydrogen into Europe from January 2026 to protect local manufacturers who pay a carbon tax for the emissions they generate.
The EFTA comprises four non-European Union nations—Iceland, Liechtenstein, Norway, and Switzerland—and India’s steel exports to these countries are negligible. But the pact with the EFTA could set a precedent in similar trade negotiations with the European Union and the UK, with carbon tax discussions taking a back seat to fast-track the trade agreements. “India wanted a mention in the FTA but the EFTA group wanted it to be discussed separately… This pattern is likely to be followed for other FTAs too," one of the government officials said.
Both of them declined to be identified. The commerce and steel ministries did not immediately reply to queries on the matter. The Indian government has been chewing over either securing a full waiver from the carbon tax for non-European Union and non-EFTA countries, or a four-year
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