INDIA PUSHES FOR CARBON TAX INCLUSION IN EU TRADE TALKS

Why in the news?

India has successfully advocated for including the Carbon Border Adjustment Mechanism (CBAM) in EU trade negotiations, aiming to ease the impact on Indian steelmakers and align standards.

About EU Free Trade Negotiations on Carbon Tax :

  • India has successfully pushed for the inclusion of the Carbon Border Adjustment Mechanism (CBAM) in its free trade agreement (FTA) discussions with the European Union (EU).
  • The CBAM proposes taxing imports of carbon-intensive products such as iron, steel, cement, aluminium, and fertiliser.
  • This tax was initially excluded from FTA talks to expedite negotiations, but India now seeks to integrate it into the FTA to mitigate its impact.
  • Indian officials are also advocating for a similar arrangement with the UK, though the UK has not yet agreed.
INDIA PUSHES FOR CARBON TAX INCLUSION IN EU TRADE TALKS - UPSCsource:editionorg

Impact on Indian Steelmakers:

  • Including CBAM in the FTA could significantly benefit Indian steelmakers, who export a large volume of steel to Europe, making it a crucial market.
  • Nearly half of the 8.8 million tonnes of steel exported by Indian mills in FY24 went to Europe, highlighting its importance.
  • Indian steelmakers argue that emission standards under CBAM should differ for developing countries, advocating for lower reduction targets compared to developed nations.
About Carbon Tax and Its Impact:

Definition and Purpose:

  • A carbon tax is imposed on carbon-based fuels (coal, oil, gas).
  • It aims to reduce greenhouse gas emissions and incentivize clean energy use.
  • Introduced in India in 2010, the tax rate is Rs. 400/tonne.

Reduction in Air Pollution:

  • Reduced Consumption: Higher costs for fossil fuels encourage reduced use and increased energy efficiency.
  • Alternative Energy Use: Carbon tax makes clean energy (solar, hydro, wind) more competitive compared to fossil fuels, promoting its adoption.
  • Better Air Quality: Reduced fossil fuel use lowers emissions, leading to improved air quality in cities like Delhi and Kanpur.

Economic and Environmental Benefits:

  • Revenue Generation: Provides funds for socio-economic projects (health, education) and pollution reduction efforts.
  • Meeting Emission Targets: Supports India’s goal to reduce carbon intensity by 33% by 2030.
  • Clean Energy Investment: Funds the National Clean Energy Fund (NCEF), supports environmental programs, and promotes initiatives like the International Solar Alliance and Make in India.

About European Union:

  • Composition: 28 member countries; 19 use the Euro.
  • Non-Euro Members: Bulgaria, Croatia, Czech Republic, Denmark, Hungary, Poland, Romania, Sweden, and the UK.
  • Origin: Established to prevent warfare and promote unity post-World War II.
  • Internal Market: Standardised laws apply across member states for agreed matters.

Associated Article:

https://universalinstitutions.com/cop27-india-china-brazil-south-africa-oppose-carbon-border-tax/