Carbon Border Tax – a first for the world, is a scheme that will see the 27-nation European bloc impose, 2026 onwards, border taxes on imports of carbon-intensive goods such as steel, aluminum, cement, fertilisers and electricity.
Aim: To ‘incentivise’ greener manufacturing around the world and create parity with European manufacturers who are already subjected to substantial carbon levies.
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Ill Consequences: The carbon tax may end up being protectionist, and will hit emerging economies like India hard.
Fact: The EU is India’s third-largest trading partner, India’s exports to the European bloc were valued at $41.36 billion in 2020-21.
Objection:
- The EU is essentially bypassing the principle of ‘common but differentiated responsibilities’ that should guide international climate action.
- Rich countries of the global north bear historical responsibility for greenhouse gas emissions. And while they were supposed to make good on promises of technology transfer and financial assistance to help developing nations transition to low-carbon pathways, a report by Oxfam says that rich nations have only mobilised $22.5 billion of the targeted $100 billion for climate funding.
- India has reduced its economy’s energy intensity by 20% from 2005 levels. This should be nurtured, not subject to an abrupt tax.
- Carbon border tax will be hugely disruptive for global trade, already suffering due to Covid and rising protectionist practices.
