EU's Carbon Tax To Impact Exports From India, Least Developed Economies: Experts

The European Union's carbon tax regime will affect exports from countries, including India and least developed countries, to that region, trade experts said on Wednesday.

EU is introducing the Carbon Border Adjustment Mechanism (CBAM) from October 1 this year.

According to a report by economic think tank Global Trade Research Initiative (GTRI), CBAM will translate into a 20-35 per cent tax on select imports into the EU starting January 1, 2026.

Professor Amita Batra from Jawaharlal Nehru University said the mechanism has a protectionist element in it.

It will impact trade with countries like India and least developed countries as it targets products being exported by these nations, she said during a webinar on her book – India's Trade Policy in the 21st Century.

She also noted that India's share in EU's trade is small.

Participating in the discussion, Professor Penny Goldberg from Yale University said CBAM would kill trade in low income countries, including India.

The mechanism would put "huge" tax on products produced by using polluting techniques.

GTRI in its report has stated that CBAM will have an adverse impact on India's exports of metals such as iron, steel and aluminium products to the EU.

In 2022, India's 27 per cent exports of iron, steel, and aluminium products of value $8.2 billion went to the EU, according to GTRI co-founder Ajay Srivastava.

Srivastva has suggested that the government should consider taking steps to deal with the situation.

He has recommended setting up a task force to prepare administrative ministries and the industry to meet the CBAM challenge, educating all steel and aluminium firms to meet the October 1 deadline, and setting up the carbon market in India.