EU CBAM concessions for others to apply to India under FTA
The free trade agreement also provides for a rebalancing of rights in case the EU’s measures under this regulation undermine or fail to provide grounds for the agreement’s benefits to Indian firms.
The Carbon Border Adjustment Mechanism (CBAM) or carbon tax, which came into effect on January 1, was one of the contentious issues in the trade agreement between India and the European Union (EU).
Within the scope of the mechanism, the EU will impose a carbon tax on goods such as steel, aluminum, fertilizer and cement that emit carbon emissions above a certain threshold during production. Currently, the tax is applied to steel and aluminum products.
“CBAM is a difficult issue. It is a horizontal arrangement that does not give flexibility to anyone. But there is a commitment that in the future, any flexibility given to any other country will be given to India. We nudged them,” the commerce ministry official said.
The commerce ministry official said that under the agreement, any flexibility or concessions that the EU gives to any country under the CBAM arrangement in the future will automatically be given to India as well.
The two also agreed to increase technical cooperation on the recognition of carbon prices and verifiers, as well as financial assistance and targeted support to reduce greenhouse gas emissions and comply with emerging carbon requirements. “We nudged them that we don’t want to come back to negotiate with you. If you provide any flexibility… please give it to us. So this is part of the FTA,” he said.
Another official said India has a non-violation clause to protect its interests against new measures.
“There is also a non-violence clause in the agreement. If a new measure comes later that invalidates the concessions given to us under the FTA, we have rights to consultation, and if consultation does not yield any results, we have rights to rebalance,” the official added.
India also pursued a similar option under the India-UK trade deal.
The agreement also envisages the establishment of a technical group that will help provide accreditation to Indian verifiers on carbon pricing.
“…our industry needs to verify its carbon footprint and get verified by verifiers accredited by them. Today, all verifiers accredited by them are in Europe. So this technical working group will ensure accreditation of local Indian verifiers as well,” the official said.
This will also enable India to understand the process of calculating its carbon footprint, so “we can train and build capacity in India as well,” the official added.
If India introduces any carbon trading or pricing regime in the future, the EU will comply.
“This technical working group will make sure how this too can be plugged in and become part of CBAM. So this will never escape us,” the commerce ministry official said.
Under the FTA, the two parties will also work together to reduce carbon emissions in India’s industrial sector.
“And they will provide technical assistance, technology support and even financial means wherever possible for this,” the official said, adding that this was also “part of the agreement.” This cooperation was also committed as part of the FTA.
