EU carbon tax impacts exports from India and least developed economies: experts

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

From October 1st of this year, the EU will introduce the Carbon Border Adjustment Mechanism (CBAM).

According to a report by the economic think tank Global Trade Research Initiative (GTRI), CBAM will lead to a tax of 20 to 35 percent on selected imports into the EU from January 1, 2026.

Professor Amita Batra of Jawaharlal Nehru University said the mechanism has a protectionist element.

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

She also noted that India’s share of EU trade is small.

Yale University professor Penny Goldberg, who attended the discussion, said CBAM would shut down trade in low-income countries, including India.

The mechanism would impose “heavy” taxes on products made using polluting techniques.

GTRI has stated in its report that CBAM will have a negative impact on India’s exports of metals such as iron, steel and aluminum products to the EU.

According to GTRI co-founder Ajay Srivastava, 27 percent of India’s US$8.2 billion exports of iron, steel and aluminum products went to the EU in 2022.

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

He has recommended setting up a task force to prepare government ministries and industry for the CBAM challenge, educate all steel and aluminum companies to meet the October 1 deadline and build the carbon market in India.

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