India Rejects EU Proposal For Higher Carbon Taxes On Exports

New Delhi, Jul 30 (KNN) India has declined a European Union (EU) proposal to implement higher taxes on carbon-producing industries, according to a senior Indian official. The EU had offered to offset these taxes for Indian products entering its market.

Economic Affairs Secretary Ajay Seth stated in an interview with Reuters that the EU's suggestion ‘is not practical’ and ‘doesn't work for a developing economy like India.’

The Indian government has conveyed to the EU delegation that the proposed Carbon Border Adjustment Mechanism (CBAM) is unfair and would negatively impact domestic market costs.

The EU approved the world's first plan to impose tariffs on high-carbon imports last year, aiming to achieve net-zero greenhouse emissions by 2050. The plan primarily targets products such as steel, aluminium, and cement.

An EU delegation, led by Gerassimos Thomas, Director General For Taxation And Customs Union, European Commission, recently met with Indian officials to discuss the CBAM. The EU maintains that negotiations are ongoing at a ‘technical level.’

The European Commission delegation suggested that India could implement its own carbon tax to fund advancements in supply chains and reduce carbon emissions while maintaining its share of the EU market.

However, Seth argued that greening the steel industry would lead to higher costs for the Indian economy, which cannot be afforded given the significant income disparity between India and Europe.

If no domestic Indian plan to tax high-carbon production is implemented, the EU plans to collect a carbon tax on steel and aluminium imports starting January 1, 2026. Industry estimates suggest potential tariffs ranging from 20 per cent to 35 per cent.

Analysts warn that the impasse over carbon emissions could strain bilateral trade and affect ongoing free trade agreement (FTA) negotiations between India and the EU. The EU is India's second-largest export destination, with exports totalling nearly USD 100 billion in 2023.

India maintains that the EU should adhere to the carbon emission rules agreed upon in the 2015 Paris Agreement, which allows developing nations more flexible emission-cutting targets compared to developed countries.

While India aims to achieve net-zero emissions by 2070 and has made progress in expanding its renewable energy capacity, challenges remain in producing greener exports solely for the EU market.

(KNN Bureau)