We previously reported on the EU’s Carbon Border Adjustment Mechanism (CBAM) which went into force on 16 May 2023.
The purpose of the CBAM is to target carbon leakage, which occurs when a company produces its products in countries with less strict climate policies. In other words, anything being imported into the EU from countries that are not as climate-sensitive, will be taxed.
This article states that 27% of India’s iron, steel and aluminum exports go to the EU and the CBAM is expected to increase the landed cost of these items by 20-35%.
In effect, India has a few choices – a) challenge the regulation via the WTO, knowing it will probably have little to no impact; b) attempt to negotiate a lower tax; or c) recognize the direction the world is heading and help its business community become certified sustainable with a carbon reduction program.
Edenark Group can help.