Government Meets Industry To Discuss Readiness To Comply EU’s Carbon Tax

The Wednesday’s meeting comes amid the CBAM being implemented by the European Union (EU), which would have an adverse impact on India’s exports of metals such as iron, steel and aluminium products to the EU.

According to a report by think tank Global Trade Research Initiative (GTRI), the tax will have an adverse impact on India’s exports of these sectors.

In 2022, India’s 27 per cent exports of iron, steel, and aluminium products worth USD 8.2 billion went to the EU. The compliance of the tax is in two parts — a requirement of filing data from October and later imposition of the tax.

The CBAM or carbon tax (a kind of import duty) will come into effect from January 1, 2026, but from October 1 this year, domestic companies from seven carbon-intensive sectors, including steel, cement, fertiliser, aluminium and hydrocarbon products, will have to share data with regard to carbon emissions with the EU.

GTRI report has stated that there are penalties on not reporting, negligent reporting or mis-reporting of data from October 1 onwards.

Sources added that the officials and industry discussed the implementation issue regarding the EU’s carbon tax, including action to be taken multilaterally and bilaterally. The commerce ministry has convened a similar meeting in May also. In that meeting, the industry was suggested to be ready for this carbon tax and take steps to comply with it.

Earlier India had sought exemption from this tax for its MSMEs (Micro, Small and Medium Enterprises) from the EU. It had also pressed the EU for a mutual recognition agreement for its carbon certificates to insulate the domestic industry from the burden of this levy. Under the mutual recognition agreement, India had asked the EU to give recognition to its Carbon Credit Trading Scheme (CCTS).

The commerce ministry had flagged the matter with the EU authorities during the TTC meeting in Brussels in May. At the multilateral level, India and certain other countries have flagged their concerns to the World Trade Organisation (WTO) on CBAM. India had already submitted a paper on the subject to the WTO in February.

Apart from senior representatives from ministries and various departments, the meeting was attended by engineering exporters body EEPC, Indian Steel Association and industry chambers. Though the 27-member European Union (EU) is claiming CBAM to be a part of their climate action efforts, industry from countries like India are of the view that it is a trade-related measure.