Govt asks industry to be ready for EU carbon tax

New Delhi, May 10 (KNN) The centre has asked the industry to be ready for the imposition of the “carbon tax” that the European Union (EU) has vouched to impose on import of products with carbon emissions higher than the prescribed threshold.

While the tax will be imposed by the EU on imports from January 1, 2026, New Delhi will engage with the 27-country group to make the transition as smooth as possible, a senior official said Tuesday.

“The government sees carbon tax as a trade issue, and not an environmental issue. It has raised objections to it at the World Trade Organisation, but the industry has to be ready for the new regime, so that exports can continue unhindered,” the official said.

To start with, the tax will be imposed on seven products whose production is carbon intensive – iron, steel, aluminium, cement, electricity, hydrogen and fertilisers.

As per reports, the government has conveyed the message to the industry in the third stakeholder consultations on Tuesday.

To help reduce the burden on the industry, the government will press the EU on mutual recognition of certification on emissions and recognition of its Carbon Credit Trading Scheme (CCTS), which is under preparation by the ministry of power, the official added.

If India’s CCTS is accepted, then payment of tax for emissions beyond prescribed threshold will be determined on the basis of price of credits on Indian carbon exchange and not price of credits on EU Emissions Trading System (ETS).

“India is dealing with the issue both at bilateral and multilateral levels so that our industry is not hurt. Bilaterally, we are asking the EU to have a mutual recognition agreement with us and make an exception for MSMEs when the carbon tax on products kicks in,” the official added.

The carbon tax or Carbon Border Adjustment Mechanism (CBAM), which cleared all hurdles in April this year before coming into force, seeks to impose tax on imports of products into the EU from geographies where carbon emissions at production stage are higher than what the rules of the mechanism will prescribe.  (KNN Bureau)