Two official teams from India and the EU discuss carbon tax issues

India and the European Union have formed two teams to discuss issues related to the EU’s carbon tax, which will come into effect from October this year, a government official said.

The European Union (EU) will introduce the Carbon Border Adjustment Mechanism (CBAM) on October 1 of this year.

This would impact seven carbon-intensive sectors, including steel, cement, fertilizer, aluminum and hydrocarbon products.

India raised these issues at the Trade and Technology Council (TTC) meeting between the two regions in Brussels in May.

At that meeting, the official said, India presented the problems domestic MSMEs would face due to this tax and also issues related to the modalities for compliance with this tax.

“Now they have agreed that a channel for discussion will be opened. So there will be a team from their side and from our side that will discuss it. “The two teams would discuss the implications of the EU’s notification,” said the official, who asked not to be identified.

India has proposed to the EU to recognize some certification agencies in India as it would be an expensive proposition for a small Indian exporter to obtain certificates from the EU. India has applied for recognition of its forthcoming Carbon Credit Trading Scheme (CCTS).

Questions about the pricing of CO2-intensive products would also be discussed.

India has already applied for an exemption for its MSMEs from the European Union’s carbon tax.

According to a report by think tank GTRI, CBAM would result in a 20 to 35 percent tax on selected imports into the EU from January 1, 2026.

From October, domestic companies from seven carbon-intensive sectors – including steel, cement, fertilizers, aluminum and hydrocarbon products – will have to obtain certificates of compliance from EU authorities to comply with CBAM standards.

The Department of Commerce held an in-depth stakeholder consultation session on the subject last month, discussing industry preparation for CBAM compliance.

Compliance consists of two parts – a requirement to submit data from October and a later collection of the tax from January 2026.

India’s iron, steel and aluminum exports to European Union countries will be subject to special scrutiny under the mechanism from October 1, according to the GTRI (Global Trade Research Initiative) report.

From January 1, 2026, the EU will start levying a carbon tax on every shipment of steel, aluminium, cement, fertilisers, hydrogen and electricity.

In 2022, 27 percent of India’s $8.2 billion worth of iron, steel and aluminum products exports went to the EU.

At the multilateral level, India and a number of other countries have raised their concerns about CBAM with the World Trade Organization (WTO). India submitted a paper on this issue to the WTO in February.

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