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India expresses concerns over EU's carbon tax

Published: 18th May, 2023

Context

India has expressed its apprehensions to the European Union regarding the Carbon Border Adjustment Mechanism (CBAM).

Key-highlights

  • The issue was discussed at the India-EU Trade and Technology Council’s ministerial meeting in Brussels.
  • The meeting also saw India and the EU agreeing to ink a Memorandum of Understanding for cooperation in the semiconductor sector.
    • India and the United States had on March 10 signed MoU to pave the way for joint projects and technology partnership for manufacturing semiconductors.

India-EU

  • India-EU trade reached a historical high, with €120 billion worth of goods traded in 2022.
  • India and the European Union have set ambitious goals of achieving net zero emissions by 2070 and 2050, respectively.
  • They have also made commitments to halt and reverse biodiversity loss by 2030 and to promote a circular economy.

Brief of CABM

  • The CBAM initiative proposed by the EU aims to levy 20%-35% taxes on carbon-intensive goods exported to any of its 27 member nations starting from January 2026.
  • It imposes importers and non-EU manufacturers to pay for the carbon emission linked to the goods they sell within EU limits.
  • Starting January 2026, the Indian steel, cement, aluminium, and fertiliser industries will pay steep Carbon Border Tax (CBT) imposed by the European Union (EU).
  • The CBAM will walk on the footprints of ETS, i.e., importers will be required to purchase carbon import certificates/ permits for each metric ton of CO2 brought into the EU through specified goods.

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