India may reach out to other nations on EU's carbon tax

New Delhi: India plans to reach out to other countries to challenge the European Union's Carbon Border Adjustment Mechanism (CBAM) at the World Trade Organization (WTO) as it compromises the principle of common but differentiated responsibility.

Officials said South Africa is also on board to challenge the CBAM, which is a global carbon tax levied on imports to the EU and will kick in from October this year.

"CBAM is a major issue of consideration. We are exploring challenging it in the WTO with South Africa," said an official, who did not wish to be identified.


Taiwan has raised concerns at the carbon tax, said people aware of the matter. India could reach out to Brazil, China and Thailand, among others, to garner support on the issue, ahead of the ministerial conference of the WTO early next year, they said.

Under the proposed EU tax drill, non-EU steel producers must report direct and indirect emissions. The mechanism will translate into a 20-35% tax on select imports into the EU from January 1, 2026. From that date, EU importers will have to declare and purchase CBAM certificates to cover emissions associated with producing imported steel products.

"They should postpone its implementation till there is clarity on its compatibility with the WTO rules. The principle of common but differentiated responsibility is being compromised," said the official cited earlier.

As per the official, India has already "strongly" discussed the issue bilaterally with the EU.

Though the EU has said CBAM is part of its climate action efforts, countries like India are of the view that it is a trade-related measure.

The joint action at the WTO is being planned in the wake of the US approving an Inflation Reduction Act to establish green technology industries and the EU's CBAM, and its law for deforestation-free products. India has told the WTO that carbon border measures are selectively applied to "trade-exposed industries" such as steel, aluminium, chemicals, plastics, polymers, chemicals and fertilisers, which reflects underlying competitiveness concerns driving such measures.