Indian Press Connect

India should respond to the EU’s carbon pricing via a measured retaliation mechanism, says GTRI

<p>According to a research released on Wednesday by think tank GTRI, India should seriously consider levying calibrated retaliatory customs taxes in response to the EU’s plan to impose a carbon price on imports of particular industries.<img decoding=”async” class=”alignnone wp-image-191619″ src=”×422.jpg” alt=” india should respond to the eus carbon pricing via a measured retaliation mechanis” width=”1397″ height=”786″ srcset=”×422.jpg 750w,×576.jpg 1024w,×432.jpg 768w,×220.jpg 390w,×84.jpg 150w, 1200w” sizes=”(max-width: 1397px) 100vw, 1397px” title=”India should respond to the EU's carbon pricing via a measured retaliation mechanism, says GTRI 3″></p>
<p>A carbon border adjustment mechanism (CBAM) will be implemented by the European Union (EU) starting in January 2026. However, the requirement’s implementation begins this year in October, when companies exporting carbon-intensive products including steel, aluminum, cement, and fertilizer would need to provide the EU authorities precise production information.</p>
<p>It claimed that the retribution tactics had a number of benefits, including quick adoption.</p>
<p>India can quickly change its tariff rates and product listings to closely match the policies of the EU or any other partner nation.</p>
<p>“Retaliate in an equivalent amount using a calibrated retaliation mechanism (CRM). Ajay Srivastava, a co-founder of GTRI, stated, “We have done it previously.</p>
<p>When the US placed import duties on India’s steel and aluminum in March 2018, India retaliated by raising taxes on 29 particular US goods.</p>
<p>With careful calculations, this response made sure that India received the same amount of money from US goods as the US got from Indian steel and aluminum.</p>
<p>“It is also crucial to understand that CBAM is only one of several programs that potentially harm Indian exports. The EU has also passed the Supply Chain Due Diligence Act (SCDDA), the Foreign Subsidies Regulation (FSR), and the Deforestation Regulation. If implemented, CRM might be utilized to lessen the effect that these programs have on Indian exports, according to the paper.</p>
<p>According to the report, the implementation of a carbon tax is anticipated to disrupt international supply chains, raise trade prices, nullify free trade agreements, and place a heavy compliance burden on companies.</p>
<p>In order to lower the overall tax paid in the EU, the study also advised the government to designate a few current levies as carbon taxes.</p>
<p>“India levies import and excise taxes on natural gas and petroleum products, as well as GST on goods including coal, steel, and aluminum. In particular for steel and aluminum, India may formally identify them as carbon taxes, it added.</p>
<p>According to this method, the carbon tax that a corporation paid in India may be deducted from the tax that must be paid in the EU, which would eventually result in a lower overall tax obligation for the company.</p>
<p>If India and the EU sign an FTA, EU products would enter India duty-free, but Indian exports to the EU will still be subject to CBAM levies, which may range from 20 to 35 percent. “It is crucial to design this scheme using internationally accepted norms to ensure acceptance by the EU,” the research added.</p>
<p>The Global Trade Research Initiative (GTRI) said that the EU’s claim that CBAM is intended to stop carbon leakage and decrease emissions is unfounded since taxing imports from across the world may not effectively address the issue of climate change.</p>
<p>The report titled “The Chameleon’s deception: How the EU is using the climate argument to subsidise local firms and make imports expensive?” stated that “the EU’s introduction of CBAM is seen as serving three primary purposes: protecting local industries, generating substantial revenue, and enabling a trillion-dollar subsidy initiative, even if it disrupts global trade.”</p>
<p>The practice of firms shifting manufacturing to nations with laxer environmental standards in order to avoid paying the EU’s carbon taxes is known as carbon leakage.</p>
<p>It claimed that this goal might have been accomplished by simply charging imports from EU companies that had moved their manufacturing elsewhere. However, the EU opted to tax all imports from across the globe via CBAM.</p>
<p>“CBAM will not lower global emissions since it just levies high-emission commodities rather than preventing their importation. CBAM is projected to cut global carbon emissions by no more than 0.1%, according to the UNCTAD Trade and Development Report 2021.</p>
<p>According to Srivastava, the EU needs this money to keep giving significant subsidies to its businesses and farmers.</p>
<p>For instance, the EU budget will contribute 503 billion euros of the 1 trillion euros the European Green Deal seeks to earn over the next 10 years. According to him, the new rules might cover the whole of the EU budget.</p>
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