Govt looking to mitigate impact of carbon levies like EU's CBAM on India Inc

The Indian government is strategically charting a course to mitigate potential impact of the implementation of carbon levies such as the Carbon Border Adjustment Mechanism (CBAM) by the European Union (EU) and the United Kingdom (UK) on its exporters and bolster domestic green initiatives.

These carbon levies pose significant challenges for developing nations, particularly those exporting goods to jurisdictions like the EU and UK where the adoption of green technologies is higher. The aim of these levies is to deter carbon-intensive imports and encourage global adoption of sustainable practices. However, they can also disadvantage exporters from countries with lower green technology adoption rates.

Engagement with WTO

To address these challenges, the government has initiated dispute proceedings at the World Trade Organization (WTO) and is engaging in bilateral discussions with the EU and UK. These discussions are aimed at finding mutually beneficial solutions, including potential deferral of the levy for Indian exporters and addressing concerns raised by Indian exporters regarding emission data requirements and protection of sensitive business information under these frameworks.

Comprehensive green tax framework

India is also focusing on developing a comprehensive green tax framework to counter the impacts of carbon levies. This framework would encompass legal aspects, rate computation, and industry coverage, ensuring an effective mechanism to offset domestic carbon taxes and incentivize green technologies within the country.

Additionally, India is considering extending incentives under central and state schemes to encourage investments in carbon emission reduction and sustainable technologies domestically. By promoting the adoption of green technologies within its borders, India aims to enhance competitiveness and mitigate the impact of carbon levies on its exporters.

Focus on multi-pronged strategies

India's approach underscores the importance of multi-pronged strategies to combat the impact of carbon levies on its economy while advancing climate change mitigation goals. This includes prioritizing carbon-related disclosures such as Business Responsibility and Sustainability Reporting, promoting tax transparency reporting, and developing a mature domestic carbon trading system