India considers compensation for exporters
The Indian government is actively considering various relief measures to mitigate the impact of the carbon tax imposed by the European Union and the UK. Among these measures is the possibility of providing compensation to affected exporters, aiming to help them maintain competitiveness in global markets. The carbon border adjustment mechanism (CBAM), or carbon tax, is expected to particularly affect India’s iron, steel, and aluminum exports valued at $8-$9 billion heading into Europe and the UK. While the initial focus is on these sectors, the CBAM has the potential to include more products with a high carbon footprint, amplifying its impact over the coming years.
The government official disclosed that potential strategies include seeking a longer transition time and exploring collaborative mechanisms to devise supportive measures, ultimately enhancing the competitiveness of Indian products. Discussions are ongoing to address the challenges posed by CBAM, with considerations such as WTO provisions and the potential violation of special and differential treatment (SNDT) for developing nations. India has already raised concerns at the WTO, arguing that CBAM undermines SNDT and advocating for a longer transition time in line with the country’s trade interests.
Trade experts have criticized CBAM for potential violations of international environmental law, emphasizing the principle of common but differentiated responsibilities (CBDR). Despite India contributing a fraction of the world’s carbon emissions, the EU and the UK have implemented CBAM to prevent carbon leakage, aiming to control the movement of production and associated emissions across countries with varying levels of decarbonization efforts and climate regulations. The ongoing discussions highlight the complexities and challenges India faces in navigating the global trade landscape amid environmental considerations.
