CBAM: India wants EU to recognise its carbon credit certification system when ready

New Delhi wants to continue bilateral efforts to avoid EU’s carbon taxes as results of WTO dispute may be uncertain

Given the fact that the bigger idea behind CBAM is to also inspire other countries to have their own carbon pricing systems, the EU should consider India’s request favourably, an official tracking the matter told businessline. (PIC: Canva)

India hopes to convince the EU to give recognition to its carbon credit certification system, once it is given a final shape by the Ministry of Power, to reduce burden of additional tariffs on carbon intensive products that the bloc plans to impose under its Carbon Border Adjustment Mechanism (CBAM) from January 2026, sources have said.

“The Bureau of Energy Efficiency under the Power Ministry is already working on the Energy Conservation (Amendment) Bill, 2022 passed by Parliament, and will put in place a carbon trading system. There will be a carbon auditor who will give certification. So, we are talking to the EU for recognition of our certificates when the CBAM kicks in,” an official tracking the matter told businessline.

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The CBAM, under which the EU seeks to impose additional import tariffs on identified energy-intensive products, such as iron & steel, cement, aluminium, fertilisers, and electric energy production from third countries which do not tax carbon at EU-approved levels, could be challenged at the WTO but the result would be uncertain, the official said.

Also read: Carbon trading important for promoting green hydrogen: BEE

“Had the EU given different standards to its domestic industry than foreign, then there would be a definite case at the WTO. Here, they have equated everything. So, we don’t know how much the case will stand if it goes into dispute. It may take years to be resolved,” the official said.

So, India needs to keep trying to sort the matter bilaterally.

“Since India will now have its own carbon trading mechanism, the EU needs to recognise the carbon certificates that will be issued in India and see how they can be used to set off CBAM payments once the mechanism is fully implemented,” the official added.

Given the fact that the bigger idea behind CBAM is to also inspire other countries to have their own carbon pricing systems, the EU should consider India’s request favourably, the official said.

Also read: Preparing industry for Carbon Border Tax

Indian Carbon Market Governing Board

In the draft Carbon Credit Trading Scheme floated by the Power Ministry last month seeking comments from stakeholders, the Ministry proposed to set up an Indian Carbon Market Governing Board.

The board will recommend procedures for institutionalising the Indian carbon market, setting rules and regulations for the functions of the market, recommend methodologies to be used under the voluntary mechanism, and propose a designated agency for the issuance of a carbon credit certificate, among other functions.

“As the CBAM will kick off from October 2023 in a simple form with industry required to just reporting days, we are also trying to prepare our industry for the same. We have also asked the EU for more clarity on the matter,” the official said.

Also watch: Green Shift. What are carbon markets?

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Reducing burden. CBAM: India wants EU to recognise its carbon credit certification system when ready