Gearing up for global competitiveness, India explores compensation and collaborative strategies to counter the imminent carbon tax blow, focusing on iron, steel, and aluminium exports
In a strategic move to mitigate the impact of the carbon tax imposed by the European Union and the UK, the Indian government is actively exploring relief measures. According to a government official, compensation packages for affected exporters are on the table, aiming to sustain competitiveness in global markets.
The Carbon Border Adjustment Mechanism (CBAM), commonly known as the carbon tax, is anticipated to affect India's iron, steel, and aluminium exports, valued between $8-$9 billion, to Europe and the UK. While CBAM currently targets specific products, there are provisions for its expansion to include more items with a high carbon footprint, amplifying the potential impact over the years.
Various options are on the table, such as seeking an extended transition time and repatriating duties. Collaborative mechanisms are also under discussion to implement supportive measures, enhancing product competitiveness.
CBAM officially commenced on October 1, 2023, introducing carbon emissions reporting requirements on imports. However, the actual tax implementation by the EU is set for 2026, marking the interim period as the transition time.
Navigating these measures within a Free Trade Agreement (FTA) poses a challenge, citing commitments to World Trade Organisation (WTO) provisions, as the official explained. These provisions allow members to enact measures to protect human lives, plants, health, and the environment.
As India confronts the implications of the carbon tax, discussions continue devising effective strategies and collaborative frameworks to safeguard its economic interests amid the changing global trade landscape.