Confirmed the EU's proposal, Union Minister for Commerce and Industries Piyush Goyal stated that India will evaluate the suggestion with the aim of devising a mechanism that not only protects its industries but also benefits its people
In a significant development in ongoing trade negotiations, the European Union (EU) has proposed that India establish its carbon tax system rather than adhere to the EU's Carbon Border Adjustment Mechanism (CBAM). This move comes as a part of the broader discussions surrounding the free trade agreement between the two regions.
Union Minister for Commerce and Industries Piyush Goyal, confirmed the EU's proposal, stating that India will evaluate the suggestion with the aim of devising a mechanism that not only protects its industries but also benefits its people. The CBAM, scheduled to be implemented in 2026, is designed to tax carbon-intensive imports such as steel, cement, and aluminium, aiming to incentivise cleaner production practices outside the EU.
The impact of CBAM could be substantial. According to the Global Trade Research Initiative (GTRI), the tax could range from 20 percent to 35 percent on certain imports. For India, which exported $7.4 billion worth of iron ore pellets, steel, and aluminium products to the EU in 2023, this could have significant economic repercussions. Approximately 27 percent of India's exports in these sectors are destined for the EU.
In related news, Goyal also addressed rumours about India's stance on Chinese investments.
The latest Economic Survey suggested leveraging the China-plus-one strategy to enhance exports amid global economic shifts. Despite industry calls to ease foreign direct investment (FDI) restrictions, especially for Chinese firms facing operational hurdles, Goyal dismissed concerns about overly supporting Chinese investments. He noted the potential risks of a significant Chinese business presence in India, highlighting the government's commitment to balancing economic benefits with national security.