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India’s Response to the EU’s Carbon Border Adjustment Mechanism (CBAM)

India has expressed its concerns regarding the European Union’s proposed Carbon Border Adjustment Mechanism (CBAM), considering it discriminatory and potentially harmful to its exports. The CBAM aims to impose a carbon tax on certain imported goods, including steel, aluminum, cement, fertilizers, and electricity, to incentivize global carbon reduction.

India’s Concerns:

  • Unfair burden: India argues that the CBAM unfairly targets developing countries like India, which are still striving for economic development and have limited resources to invest in clean technologies.
  • Protectionist measure: India believes the CBAM is a disguised protectionist measure designed to shield European industries from competition.
  • Compliance burden: The CBAM’s complex compliance requirements pose a significant burden on Indian exporters.

India’s Actions:

  • Dialogue: India seeks to address the issue through dialogue and negotiations with the EU. Commerce and Industry Minister Piyush Goyal has stated that India will “engage with the EU in various dialogues and fora to address the issue.”
  • Legal challenge: India is considering challenging the CBAM at the World Trade Organization (WTO), claiming it violates free trade principles.
  • Developing domestic carbon market: India is actively developing its own domestic carbon market to reduce emissions and address climate change concerns.

Possible Outcomes:

  • Negotiated settlement: India and the EU may reach a negotiated settlement on the CBAM, possibly including exemptions or special provisions for developing countries.
  • WTO challenge: If negotiations fail, India may file a formal complaint against the CBAM at the WTO.
  • Retaliatory measures: India has hinted at the possibility of imposing retaliatory measures against the EU if the CBAM is implemented in its current form.

Overall, the EU’s CBAM poses a significant challenge for India’s exports. The Indian government is taking a multi-pronged approach to address the issue, including dialogue, legal challenges, and developing its own carbon market. The outcome of this dispute will have significant implications for global trade and climate change policy.

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