India-EU: global dynamics

Source: This post is based on the article “India-EU: global dynamics” published in The Indian Express on 7th Jul 22.

Syllabus: GS3 – Environment

Relevance: Transition towards clean energy

Context: Both India and the EU are committed to climate change, and the recent progress in India-EU alliance opens prospects of a customised partnership and mutual growth.

Carbon neutrality and European Union

At the forefront of the commitment to net-zero is the European Union, which wants to be the first carbon-neutral region in the world by 2050.

It brought out the ‘European Union Green Deal’ in July 2021 to focus on a new growth strategy. It aims to transform the EU society into a fair and wealthy one with a modern, resource-efficient and competitive economy.

What has the EU done to achieve carbon neutrality?

To attain carbon neutrality, the EU has set forth immediate targets and has brought out the ‘Fit-for-55’ package, a communication of its 2030 climate targets.

– A provision in the policy plan is the introduction of Carbon Border Adjustment Mechanism (CBAM), a carbon-pricing system proposed for imports into the EU. The CBAM suggests taxing the imported goods-based difference between carbon used in the production of domestic and imported goods.

– CBAM is proposed to be complementary to the EU Emission Trading Scheme (EUETS)

What are the concerns regarding CBAM?

Developing countries have raised their concern on the b pointing out its conflict with WTO and UNFCCC norms, and are afraid that it encourages protectionism.

Developing countries also flag the use of revenue collected from CBAM.

– According to the EU, revenue collected from CBAM will be a part of the EU’s budget, the NextGenerationEU, a recent initiative launched to provide economic support to EU member countries impacted by the COVID-19 pandemic.

– Countries opposing the proposed revenue utilisation mechanism suggest that if CBAM is to be implemented, revenue collected from it should be used for cleaner technology adoption in developing countries.

Trade relationship b/w India and EU

India and the EU share a healthy trade relationship.

The EU is India’s third-largest trading partner, while India is EU’s 11th largest trading partner.

Recently, there has been increasing initiative from both sides to deepen engagement with each other.

Talks on India-EU Free Trade Agreement (FTA) that were stalled a while ago have picked up again and are scheduled to take place in June. The target to finalise the Free Trade Agreement has been set for 2023-24.

Way forward

Both India and the EU are committed to climate change. Rather than taxing exports to EU as proposed in CBAM, India and EU can cooperate better by investing in cleaner and greener technologies in India and helping in cleaning up production in India.

Such a partnership will ensure that both India and the EU have their agendas of economic growth and sustainability fulfilled, a win-win situation for both entities.