The CBAM is a proposed tariff that the European Union plans to impose on imports of goods associated with high carbon emissions. The primary goal is to discourage carbon-intensive production methods outside the EU, thereby preventing 'carbon leakage'—a phenomenon where companies shift production to regions with more lenient emissions regulations. This mechanism aims to promote greener practices and ensure that imported goods adhere to environmental standards.
The EU's proposal outlines tariffs that would range from 20% to 35% on imports deemed high-carbon. The products highlighted for these tariffs include steel, iron ore, cement, aluminium, fertilisers, electricity, and hydrogen. This initiative reflects the EU's commitment to reducing carbon emissions and supporting environmentally friendly production.
India views the CBAM as a discriminatory measure and an unfair trade barrier. Senior government officials argue that under the pretense of environmental protection, the EU is imposing restrictions that could severely impact exports from India and other developing nations. India plans to underscore its commitment to the U.N. Paris climate agreement as a testament to its dedication to environmental protection while questioning the legality of the CBAM at the WTO.
Initial projections suggest that approximately $8 billion worth of Indian exports—primarily steel, iron ore, and aluminium—would be subjected to these tariffs. The potential economic repercussions have prompted India to consider various strategies to address this challenge.
India intends to file a complaint with the WTO regarding the EU's decision, seeking relief particularly for small exporters adversely affected by these tariffs. Policymakers are also contemplating proposals from sectors like steel for safeguard measures against imports as a reciprocal action. The Federation of Indian Export Organisations has cautioned that the CBAM could jeopardize India's free trade agreements with other countries.
The European Union has positioned itself as a trailblazer in the global fight against climate change, aiming to achieve net-zero greenhouse gas emissions by 2050. However, there is a growing concern that other nations, including the UK, Canada, Japan, and the US, may adopt similar measures, escalating global trade tensions. The actions taken by nations like India against the CBAM could set a significant precedent for future international trade and environmental negotiations.
The global community is poised to closely monitor the negotiations and discussions at the WTO. The outcome could significantly influence the delicate balance between international trade and environmental conservation, shaping policies for years to come.
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