NEW DELHI: As the European Union’s carbon border tax comes into effect from January 1, the Centre for Science and Environment (CSE), a New Delhi-based think tank, Saturday warned that the move would shift the decarbonisation costs on to developing countries including India. It said decarbonisation is critically important, but should not be pushed through unilateral measures like Carbon Border Adjustment Mechanism (CBAM) which is expected to generate 1.5 billion euros annually for EU nations by 2028 at the cost of the Global South.CBAM — carbon border tax — is a tool to put a price through imposing border tax on greenhouse gas (GHG) intensive goods (emission generated during production), like iron & steel, aluminium, cement and fertilisers, that are entering the 27 EU nations. It will put a tariff burden on such products of developing countries and impact their trade.Noting its implication for India, the CSE’s analysis shows that CBAM could impose substantial cost pressures on steel and aluminium exports to the EU and it could face a price burden of around 25% — a shock that exporters are likely to absorb through price compression in order to remain competitive. This is the reason India and many other countries, including China and South Africa, have been resisting it for long. “By putting a carbon price at the border, CBAM changes how competitiveness is defined in global trade. But what it also does is shift the decarbonisation costs to developing countries, thus extending a familiar dynamic where developing countries adapt to rules set elsewhere, under conditions that structurally disadvantage them,” said Sunita Narain, director general, CSE.“Decarbonisation in industry is both necessary and unavoidable. Developing countries will need to pursue decarbonisation to remain competitive. However, this transition can’t be driven through unilateral steps alone,” she said.
