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Union Finance Minister Nirmala Sitharaman (Photo: PTI)
Unilateral and arbitrary measures like the Carbon Border Adjustment Mechanism (CBAM) tax will hurt Indian industry and pose a challenge for India, Finance Minister Nirmala Sitharaman said on Wednesday. The finance minister also highlighted that the proposed Deforestation Act by the European Union would cause major disruption in the supply chain and not assist countries like India, which are incurring significant transition costs.
Speaking at an event hosted by the United Kingdom’s Financial Times, Sitharaman said, “As a country which has proven its record, and for international agencies to have recognised that it is keeping its commitment (for climate action goals) and fulfilling it, to have to face unilateral measures like this will be the challenge… These are such not so helpful ways in which developed countries follow certain policies which are unilateral and, I’m sorry to say, arbitrary.”
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According to the European Union, CBAM is a tool to put a fair price on the carbon emitted during production of carbon-intensive goods entering the trade bloc.
Sitharaman said that CBAM was a trade barrier which may be justified to the World Trade Organisation (WTO) on grounds of being “green.” “I’m not sure whether it is WTO compliant, but we have been told that it could be.”
In conversation with Financial Times’ South Asia bureau chief John Reed, Sitharaman said, “You’re putting a tariff for what you define as dirty steel, while you yourself would produce the dirty steel and make sure that the money which you earn from this is funding your conversion from dirty to green steel.”
The finance minister said that India’s concerns around CBAM have been voiced in the free trade agreement (FTA) negotiations with the European Union and would be raised again, though the issue may not be escalated to the extent of harming the talks.
The carbon tax will come into effect from January 1, 2026. During the trial period, which started on October 1, 2023, companies from seven carbon-intensive sectors, including steel, cement, fertiliser, aluminium, and hydrocarbon products, are required to share emissions data with the European Union.
Sitharaman said that India’s commitment towards the net zero goal is evident in the country’s performance. She stated that India was on track to meet the 2030 climate action goals on time.
“The challenges are more external than within the country. We keep reminding ourselves that our emission per capita is a third of what it is globally,” the finance minister said.
She added that India was consistent in promoting every renewable source of energy. “India is one of those which is putting money where it should be put.”
First Published: Oct 09 2024 | 5:19 PM IS