India may be damaged up until 0.05% of its GDP by the European Union’s Carbon Border Adjustment Mechanism (CBAM) according to a report and should consider counter-measures against countries in the EU historically responsible for climate change.
The CBAM is a proposed tax mechanism for iron, steel, cement, fertilizers and aluminium imported from countries like India and China as a way to level the disadvantage that local European producers have due to EU carbon emission quota and tax. According to the EU the CBAM will also help lowering emissions from imports and should help developing countries to further their decarbonisation efforts.
The Indian public interest research organisation Centre for Science and Environment (CSE) released a report that calculated, using data from the past three years, a tax burden equal to 0.05% of its GDP after the CBAM becomes operative. The EU plans to make the CBAM operative in 2025, after announcing it in 2022.
Basing on data for 2022-23, goods that will be taxed under the CBAM equal to almost 10% of total exports to the EU. The CSE calculated that the new system will impose a 25% tax burden on Indian producers. As a counter-measure, the CSE proposed a tax on rich countries who have been historically responsible for climate change.
The CSE noted that “tools like carbon border taxes imposed by rich countries will further take away the ability of developing countries to finance decarbonisation.” During a webinar to present the report, CSE director general Sunita Narain said that “Measures like CBAM are unilateral measures and shift the burden of the transition to the developing world. This, when developed countries themselves have not reduced their emissions sufficiently and continue to occupy carbon space.”
