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In this episode of the State of the Economy podcast, businessline’s Amiti Sen discusses the EU’s recent environment-related measures, focusing on the Carbon Border Adjustment Mechanism (CBAM) and the EU deforestation regulation, with Ajay Srivastava, a former Indian Trade Services officer and founder of the research body Global Trade Research Initiative (GTRI).
The CBAM is a tax proposed by the EU on certain products, starting in January 2026 and gradually expanding to cover all possible products by 2034. The initial list of products includes steel, aluminium, cement, hydrogen, electricity, and fertiliser.
The EU aims to implement this measure as part of its ambitious environmental and climate agenda. The EU already has an emission trading system in place, that sets emission limits for industrial installations and power plants.
Companies exceeding these limits face penalties, while those performing better are rewarded. However, certain sectors, such as steel, aluminium, paper mills, and cement mills, were exempt from these regulations, leading to the concept of “carbon leakage,” where polluting industries would shift production to countries with lower environmental costs.
To address this, the EU introduced the CBAM as a tax on imports to discourage cheaper imports and ensure a level playing field. The speakers analyse the potential impact of the CBAM on Indian exports. India exports over $77 billion worth of goods to the EU annually, with steel and aluminium being the most affected products, accounting for $5.2 billion and $2.7 billion in exports, respectively. The CBAM will be implemented gradually, with data sharing between India and the EU starting on October 1, 2023.
This will be followed by the submission of emission certificates to EU authorities. Industries are currently assessing their options and discussing strategies to meet the CBAM requirements and reduce their carbon content. The timeline and clarity of the regulations pose challenges for the industry, but discussions are ongoing at various levels to navigate the situation. Listen in.
(Host: Amiti Sen, Producer: V Nivedita)
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