India, China, Brazil, South Africa oppose ‘carbon border tax’

Source: The post is based on the article “India, China, Brazil, South Africa oppose ‘carbon border tax’” published in The Hindu on 17th November 2022

What is the News?

India, China and other developing countries have opposed the proposed European Union’s Carbon Border Adjustment Mechanism (CBAM).

What is Carbon Border Adjustment Tax?

A carbon border adjustment tax is a duty on imports based on the amount of carbon emissions resulting from the production of the product in question. 

As a price on carbon, it discourages emissions. As a trade-related measure, it affects production and exports.

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

The European Union is planning to implement a Carbon Border Adjustment Mechanism(CBAM) from 2026.

The proposed import tax would initially apply to five sectors: electricity, iron and steel, fertilizers, aluminium and cement. 

How will this impact India?

This will negatively impact the Indian industry which has significant export interests in the EU. 

The EU has been the destination for nearly 17% of total Indian exports in the period of 2012-2021. 

Around 6% of these exports will fall under the purview of the CBAM. Of these CBAM- implicated Indian exports, the iron & steel sector, followed by aluminium will be the most affected.

What were developing countries’ views on the EU’s Carbon Border Adjustment Mechanism (CBAM)?

BASIC, a group constituting Brazil, India, South Africa and China has said that unilateral measures and discriminatory practices such as carbon border taxes could result in market distortion and aggravate the trust deficit amongst countries.

It is also against the UN principle of Common but Differentiated Responsibilities and Respective Capabilities(CBDR–RC). The CBDR-RC acknowledges that richer countries have the responsibility of providing financial and technological assistance to developing and vulnerable countries to fight climate change.