CBAM Could Impact India's Trade And Employment In Carbon-Intensive Sectors: CSEP

ENA Economy 2025-01-02 15:42:29 New Delhi, Jan 2 (KNN) A comprehensive study by the Centre for Social and Economic Progress has revealed that there are conflicting estimates available in the literature for the potential impacts of the European Union's Carbon Border Adjustment Mechanism (CBAM) and therefore the study develops a framework for the Computable General Equilibrium (CGE) model which can examine these impacts on the Indian economy. The study reveals discrepancies in existing literature concerning the potential impact on India's exports to the EU. While some estimates suggest the impact could be as high as approximately 58 per cent, others indicate a much lower effect, around 0.1 per cent, specifically on iron and steel exports to the EU. The carbon pricing mechanism, which entered its transitional phase in October 2023 and will be fully implemented by 2026, requires EU importers to account for carbon emissions embedded in imported goods. While designed to create a level playing field between EU and non-EU producers and prevent carbon leakage, the policy poses substantial challenges for Indian industries that maintain strong trade relationships with European markets. The Indian exporters may face increased operational costs under CBAM, potentially leading to trade diversions and diminished competitive advantages. The study also notes the possibility of similar mechanisms being adopted by other nations, which could complicate international trade relationships. To address these challenges, the research advocates for the implementation of domestic carbon pricing policies in India that align with global standards. The study emphasises the importance of revenue recycling strategies to minimise economic disruption and support technological advancement in affected sectors. The detailed CGE model developed for the analysis provides policymakers with tools to evaluate CBAM's broader economic implications. The research concludes with recommendations for Indian policymakers to adopt proactive measures in preparation for evolving global climate policies. While acknowledging CBAM's environmental objectives, the study underscores the necessity of balanced approaches that protect both economic interests and environmental sustainability in emerging economies like India. (KNN Bureau) 40483 https://knnindia.co.in/news/newsdetails/economy/cbam-could-impact-indias-trade-and-employment-in-carbon-intensive-sectors-csep 2025-01-02 15:42:29 knnindia.co.in CBAM Could Impact India's Trade And Employment In Carbon-Intensive Sectors: CSEP