Linking India's Carbon Market with EU's CBAM: A Breakthrough or a Barrier?
UPSC Relevance
Prelims: Environment (Climate Change, Carbon Border Adjustment Mechanism (CBAM), Carbon Credit Trading Scheme (CCTS), EU-ETS), International Relations (India-EU Strategic Partnership), Economy (International Trade, WTO).
Mains:
General Studies Paper 2 (Polity & IR): Bilateral, regional and global groupings (India-EU); WTO and its functioning; Government policies.
General Studies Paper 3 (Environment & Economy): Conservation, environmental pollution and degradation, climate change; Indian Economy and issues relating to trade; Effects of liberalization (protectionism).
Key Highlights from the News
Proposal to link India's Carbon Market (ICM) with the EU's Carbon Border Adjustment Mechanism (CBAM) as part of the new New Strategic EU-India Agenda.
Objective: To allow Indian exporters to deduct carbon prices paid in India from the CBAM tax in the European Union.
This will help protect Indian exporters from being penalised twice and incentivize companies that reduce pollution.
Major Barriers:
India's Carbon Credit Trading Scheme (CCTS) is still not fully developed. It is not based on absolute caps (a limit on total pollution) like the EU's.
The price in India (€5-€10) is significantly lower than Europe's carbon price (approx. €60-€80/ton) – a price gap.
Cooperating with a policy that India opposes at the WTO is a political contradiction.
Granting the EU authority to decide if India's domestic policies are "adequate" would affect India's sovereignty issue.
The article warns that if these issues are not resolved, this "great leap forward" will remain only on paper.
COMMENTS