India has raised concerns at the WTO on the emerging trend of using environmental measures as protectionist non-tariff barriers, such as the carbon border adjustment measures (CBAM) planned by the EU, that may hurt developing nations the most.

At the recent meeting of WTO Committee on Trade and Environment, India presented a paper where it also voiced its apprehensions about some other measures hurting poorer countries such as environment based management of minimum residue limits or MRLS in agriculture, deforestation related measures and quantitative import restrictions based on green content of commodities, a Geneva-based trade official told businessline.

Why is India concerned about the EU’s carbon border tax?
In response to the EU’s carbon border tax, India might impose retributive tariffs on the EU’s exports. The European Union wants to impose an extra tax on products brought into the EU as imports, such as iron, steel, and cement to encourage “cleaner industrial production in non-EU countries.”  This levy is called the Carbon Border Adjustment Mechanism. India is concerned about the tax because it will make the country’s steel exports more expensive.  The tax will be a significant challenge for India’s metal sector, notes Ajay Srivastava, founder of the Global Trade Research Initiative. Watch this video to know more. 

“Both India and Colombia circulated papers suggesting how work should be carried out at the WTO keeping in mind the fact that developing countries were at the receiving end of rising use of environmental trade measures,” the official said.

Also read: EU’s carbon tax could prove to be major challenge for Indian metal exports: GTRI report

Green taxes

CBAMs are in the form of taxes on imports based on the amount of carbon emissions resulting from the production of the item being imported. It makes imports expensive and uncompetitive as the levies increase the end price of the imported products.

The full implementation of the EU’s CBAM is scheduled to kick off from 2027 although the mechanism would come into force in October 2023. The EU says that these measures will create a level playing field with countries with less ambitious climate policies, that currently undermine bloc’s global climate objectives.

Common but differentiated goals

In its paper, India stressed that the principle of common but differentiated responsibilities should not be ignored in the protection of the environment.

China proposed that multilateral exchanges should be intensified on high-impact environmental measures at the WTO. It offered to pilot such multilateral discussions at the June meeting of the Committee which would focus on the EU’s CBAM.

The EU pointed out that it had been doing its bit in sharing information on the CBAM at the WTO over the past two years. It offered to hold an information session on the CBAM legal text in May but added that the Committee should not become an informal dispute settlement body.