Carbon tax proposed by EU unilateral, arbitrary to hurt India's export: FM Sitharaman

New Delhi: Finance Minister Nirmala Sitharaman on Wednesday said the Carbon Border Adjustment Mechanism or CBAM is unilateral and arbitrary and will hurt India's exports after its implementation by the European Union. CBAM are tariffs that will apply on energy-intensive goods imported into the European Union (EU). The EU has decided to impose carbon tax CBAM from January 1, 2026, on seven carbon-intensive sectors, including steel, cement, and fertiliser.

Engineering goods will come under the purview of this import duty.

It is a border tax introduced by the EU, and such moves are going to create a trade barrier, she said while speaking at the Energy Transition Summit organised by Financial Times.


Against this, she said, India has voiced its concern several times to the EU, and the government is also looking at ways to reduce the cost of transactions.

The decision by the EU may affect the profitability of Indian exporters, as Europe is among the top export destinations for the country. India's total trade with the EU was USD 137.41 billion in 2023-24, with imports at USD 61.48 billion and exports at USD 75.93 billion.

She, however, said it was unlikely that India's opposition to the CBAM would be a barrier to finalising the Free Trade Agreement (FTA) with the EU.

"I am sure it won't be escalated to the level of hurting the (FTA) talks," she said.

She exuded the confidence that India would achieve net Zero by 2070.

"Yes, we are on track to achieve 2030 carbon emission reduction goals," she said, adding that the Budget has allocated made huge allocation for battery storage.

To another query on India's green initiatives, Sitharaman said Prime Minister Narendra Modi has led from the front in setting the agenda for the country, and the commitments given in the UN climate change conference COP 21 were fulfilled by India well ahead of time, with its own resources.

On the decarbonisation of India's economy, she said the government has brought in the PLI (production-linked incentive) scheme for 13 sunrise sectors, which included green energy.

"We also have PLI for automobiles and electric vehicles. So, budget has never been a constraint in promoting the green sectors," Sitharaman said.

Speaking about the 'PM Surya Ghar Muft Bijli Yojana', the minister said the scheme has been provided budgetary support and received an overwhelming response from the citizens.

Two million applications have come since its launch, and the target is 10 million, she added.