EU's Carbon Tax to Cost India 0.05% of GDP, Says New Report
The European Union's Carbon Border Adjustment Mechanism (CBAM) will introduce a 25 per cent tax on energy-intensive goods exported from India to the EU, according to a recent report. This tax is expected to impact 0.05 per cent of India's GDP, as per the findings by the Centre for Science and Environment (CSE). The report titled "The Global South's response to a changing trade regime in the era of climate change" bases its conclusions on data from 2021-22, 2022-23, and 2023-24. CBAM targets products like iron, steel, cement, fertilisers, and aluminium imported from countries such as India and China. The tax is calculated based on the carbon emissions produced during the manufacturing of these goods. The EU claims this mechanism ensures fair competition for locally made products that must comply with stricter environmental regulations and aims to cut down emissions from imports. Impact on Indian Exports Avantika Goswami, who heads CSE's climate change programme, highlighted that India's CBAM-covered goods exports to the EU made up 9.91 per cent of its total goods exports to the bloc in 2022-23. She noted that 26 per cent of India's aluminium and 28 per cent of its iron and steel exports were directed to the EU during this period. These sectors are significant contributors to the CBAM-covered goods shipped from India to the EU. In 2022-23, CBAM-covered goods exports to the EU represented about one-fourth (25.7 per cent) of India's total such goods exported globally. This is crucial for industries operating within these sectors. However, hydrogen and electricity are not currently exported from India to the EU.
