India is exploring the possibility of teaming up with other developing nations to collectively challenge the European Union’s proposed carbon border adjustment mechanism (CBAM) at the World Trade Organization (WTO). The CBAM is a carbon tax that the EU intends to impose on imports of certain goods from countries lacking similar carbon pricing systems. India carbon tax
Expressing its concerns to the EU, India seeks to safeguard its exports. However, the EU has not displayed any indications of reconsidering its stance on the CBAM. In response, India is contemplating the WTO route, potentially rallying support from other developing countries that share similar worries about the CBAM’s impact on their exports.
Challenging the CBAM at the WTO would likely involve a protracted and intricate process. Nevertheless, it presents a viable option for India to protect its exports from the EU’s proposed carbon tax.
Impact on India
Increased costs for Indian exporters: The CBAM could raise costs for Indian exporters as they would be liable to pay the carbon tax when exporting goods to the EU. Consequently, Indian products might become less competitive in the European market.
Reduced exports to the EU: The CBAM has the potential to diminish India’s exports to the EU as Indian exporters might be reluctant to bear the burden of the carbon tax Such a development could have adverse implications for the Indian economy.
Pressure to implement a domestic carbon pricing system: The EU has stated that countries will be exempted from the CBAM only if they have implemented their own carbon pricing systems. This could exert pressure on India to establish its own carbon pricing system, a complex and costly endeavor.
India is carefully assessing its options in responding to the CBAM. Nevertheless, it is evident that the CBAM could significantly impact the Indian economy, prompting a proactive evaluation of potential countermeasures.
