Is the EU’s Carbon Border Adjustment Mechanism a trade barrier for India? EU official responds

Europe, a net importer of CBAM goods wants to reduce carbon intensity of imported goods, with many Indian industries claiming their products can be sustainable.

The European Union’s Carbon Border Adjustment Mechanism (CBAM) is not a restrictive trade barrier, and is only for dealing with carbon emissions, said Gerassimos Thomas, Director-General of the European Commission’s Directorate-General for Taxation and Customs Union, who had visited New Delhi along with other EU officials to discuss the implementation and effects of the CBAM for both India and Europe.

European Union flags outside the European Commission headquarters in Brussels, Belgium. (Reuters)

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

The CBAM is the European Union’s planned tax on carbon emissions caused due to manufacturing of goods imported to the EU from countries like China and India. It especially focuses on energy-intensive products like iron, steel, cement, fertiliser and aluminum, according to a PTI report.

“A lot of the industries that I have met are saying that they have products that are sustainable, even having embedded emissions less than the EU,” Thomas said, according to a WION report. “It creates positive competition between the companies, and the ones that are greener have a better and more open access,” he added.

Why is the EU's CBAM controversial?

The CBAM has been controversial due to concerns among poorer countries that it can lead to inability to export goods and cause harm to their economies and livelihoods.

"Europe is a net importer of CBAM goods and wants to make sure that we continue importing goods with the lowest possible carbon intensity to contribute to decarbonization at a global level,” said Thomas, according to the PTI report. "It (CBAM) does not discriminate and has a very gradual phase-in to give maximum predictability for investors and businesses," he added.

Thomas held multiple meetings with ministries like Finance, Steel, Power, Commerce and Industry, Environment, Forest and Climate Change, and New and Renewable Energy. The Confederation of Indian Industry (CII) and the Federation of Indian Chambers of Commerce and Industry (FICCI) was also involved in the discussions, Financial Express wrote.