India call EU’s CBAM “discriminatory”

Source: The post India call EU’s CBAM “discriminatory” has been created, based on the article “How India could counter the CBAM” published in “The Hindu” on 20th November 2024

UPSC Syllabus Topic: GS Paper3- Environment

Context: The article discusses the EU’s Carbon Border Adjustment Mechanism (CBAM), which imposes carbon costs on imports. India criticizes it as discriminatory and suggests alternatives like Equity-based Accounting to ensure fairer climate responsibilities and support for developing nations’ capacities. EU’s Carbon Border Adjustment Mechanism

For detailed information on Challenges of EU’s CBAM for India read this article here

What is the EU’s Carbon Border Adjustment Mechanism (CBAM)?

1. The European Union’s Carbon Border Adjustment Mechanism (CBAM) requires exporters to the EU to pay for the carbon emissions associated with the goods they sell.
2. This policy aims to level the playing field by ensuring that imported goods bear a similar carbon cost to those produced within the EU. It is scheduled to fully start on January 1, 2026.

Why does India call CBAM “discriminatory”?

1. Unfair Responsibility Under Production-Based Accounting: The United Nations Framework Convention on Climate Change (UNFCC) uses a production-based accounting principle. This makes exporting nations like India responsible for emissions from exported goods, even though these goods are consumed in importing nations like the EU. India proposes alternatives like Equity-based Accounting, which reflects fairer distribution based on per capita GDP and emissions.
   2. Economic Impact on India: The EU comprises 20.33% of India’s merchandise exports, and 25.7% of these exports (iron, steel, aluminium, cement, and fertilizers) are affected by CBAM. Iron and steel alone account for 76.83% of these exports.
2. Revenue Inequality: The EU plans to keep CBAM revenues (estimated at €5-14 billion annually by 2030) for its own programs like NextGenerationEU. India argues this revenue should support developing economies through technology transfer and capacity building.
3. Lack of Justice: CBAM does not account for compensatory or distributive justice, ignoring historical contributions to climate change by developed countries. It imposes disproportionate responsibilities on developing nations.
4. Insufficient Preparation Time: The EU has had years to prepare for its emission reduction goals (e.g., 20% reduction by 2020 under the 2008 Climate Action Plan and 55% by 2030 under the Green Deal). Developing countries, however, are given minimal time to adapt.

Question for practice:

Examine the challenges posed by the EU’s Carbon Border Adjustment Mechanism (CBAM) for India and India’s criticisms of the policy.