India considers imposing sector-specific taxes to counteract the European Union's carbon tax while criticising the EU's approach as detrimental to global trade
To address the looming imposition of the European Union's carbon tax, India is contemplating implementing a domestic tax strategy aimed at specific sectors. This move is intended to support India's transition to green energy and navigate the challenges posed by the EU's decision.
Commerce and Industry Minister Piyush Goyal, in remarks made on November 2, expressed concerns about the EU's carbon tax plan. He stated that the EU's decision to levy a carbon tax on sectors such as steel is "ill-conceived" and could adversely affect the manufacturing sector within the EU.
The government believes that the EU's Carbon Border Adjustment Mechanism (CBAM) needs to be revised and address the underlying issues correctly and equitably. It has asked the EU to adopt a more nuanced approach, one that accounts for the differences between less-developed and developing countries and seeks to level the global trade playing field without causing harm to nations or their exports.
The EU's Carbon Border Adjustment Mechanism (CBAM), commonly called the carbon tax, is set to take effect from January 1, 2026. However, as of October this year, domestic companies operating in seven carbon-intensive sectors, including steel, cement, fertiliser, aluminium, and hydrocarbon products, must share data regarding their carbon emissions with the EU.
India has strongly criticised this move and is actively engaged in discussions with the EU to address the concerns raised by this policy.
The dispute between India and the EU over the carbon tax underscores the ongoing global debate about how best to tackle carbon emissions while ensuring a fair and equitable transition to greener energy sources.