India expresses concern over EU’s Green Deal, possible carbon taxes

India, the US and a few other countries have expressed apprehensions over the European Green Deal and the impact of carbon border taxes that could be imposed on imports once the proposed Carbon Border Adjustment Mechanism (CBAM) is implemented. India has called for a legal analysis of the deal, a Geneva-based trade official said.

“As many as nine countries intervened and expressed their apprehensions in response to the EU’s presentation on its Green Deal at the WTO’s Committee on Trade and Environment meeting this week. New Delhi pointed out that a legal analysis of the Green Deal, including the carbon adjustment mechanism and the possible carbon taxes on imports, has to be carried out and its compatibility with WTO norms needs to be looked into,” the official told BusinessLine.

Other countries that expressed their concerns include Canada, Colombia, Norway, Paraguay, the Russian Federation, Saudi Arabia and Turkey.

Reducing carbon leakage

The EU, in its presentation, said the Green Deal was important as it would lead the EU economy towards sustainability. It said that the arrangement would ensure mimimum risk of ‘carbon leakage’ when dealing with nations that did not share its ambitions on climate action, the official said.

Other countries that expressed their concerns include Canada, Colombia, Norway, Paraguay, the Russian Federation, Saudi Arabia and Turkey.

The proposed CBAM is one of the primary policy instruments of the Green Deal which seeks to put in place rules to make Europe climate-neutral by 2050. For this, greenhouse gases emissions have to be brought down to very low levels by 2030.

What is carbon leakage?

Countries are apprehensive that under the CBAM, the EU may impose carbon taxes on imports, beginning with energy-intensive sectors, in order to prevent ‘carbon leakage’. According to the European Commission, carbon leakage refers to the situation that may occur if, for reasons of costs related to climate policies, businesses were to transfer production to other countries with lenient laxer emission constraints. The mechanism will aim to ensure that the price of imports reflect more accurately their carbon content, as per the EC’s explanation, which also said that the precise design is to be finalised.

In its intervention at the WTO, India asked the EU to share details of the CBAM to know what exactly was being planned. New Delhi also pointed out that there could be possible issues of non-compliance with WTO rules and the matter required further scrutiny, the official added.

The EU said that it was trying to design the CBAM in a way that it is compliant with WTO rules and its trade obligations with other countries. The deliberations in the Committee on Trade and Environment will continue through this week.