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India is in talks with the EU for allowing energy auditors from the country to do carbon verification of the identified carbon intensive exports, primarily steel and aluminium, on which the bloc is set to impose a carbon tax in 2026 under the Carbon Border Adjustment Mechanism (CBAM) to be implemented this October, government officials have said.
“There will of course be an impact of the CBAM on the steel and aluminium sectors. The extent to which it can be mitigated, the extent to which our industries can adapt, the extent to which recognition of the testing and certification agencies is ensure, are all areas on which the inter ministerial group (IMG), which includes the Commerce Secretary, are coordinating,” DGFT Santosh Sarangi said in a media interaction on Monday.
There are about seven commodities on which the EU is set to impose a carbon tax of which the two areas in which India will be impacted are steel and aluminium, he said. Although initial calculations made by the government have estimated that less than 1.8 per cent of India’s exports valued at about $8 billion could be hit by CBAM, assessments were still being made.
Monetary impact
“The monetary impact is still being assessed. The EU has prescribed different mechanism of imposing carbon tax. For instance, for steel manufacturing through electric furnace and through blast furnace, the carbon border tax will be different. Assessment of how much steel being produced in India is going through blast furnace and how much through electric furnace has to be done,” he explained.
Other officials explained that the IMG was also working on areas such as India’s own carbon trading system being finalised and how it can be recognised by the EU. “They should also enable our energy auditors to do the carbon verification. That will reduce cost of verification. Talks are on with the EU on this, ”the official 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. India wants the EU to recognise its certificates when the CBAM kicks in.
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