India Voices Concern over Europe’s Carbon Tariff Measure at WTO

China introduced a proposal for multilateral negotiations on CBAM


India has expressed concern about the carbon border measures proposed by the European Union (EU) at a recent meeting of the World Trade Organization’s (WTO) Committee on Trade and Environment.

Presenting a paper on the increasing use of environmental measures as protectionist non-tariff barriers, India said it was concerned about the proposed Carbon Border Adjustment Mechanism (CBAM), which seeks to impose a carbon tariff on carbon-intensive products imported into Europe.

The EU’s carbon measure seeks to put a ‘fair price’ on the carbon emitted during the production of carbon-intensive goods entering the EU and encourage cleaner industrial production in non-EU countries.

The CBAM will initially apply to imported products and commodities like cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen. It will enter into force in its transitional phase on October 1, 2023.

Besides CBAM, India also opposed import restrictions based on the green content of commodities, deforestation-related measures, and environment-based management of minimum residue limits in agriculture.

Indian exporters of commodities, especially aluminum, iron, and steel, to the EU will have to meet these standards much faster than before to comply with CBAM.

In December, Finance Minister Nirmala Sitharaman, without referring to CBAM, had warned Indian industry to be prepared for the impending tariffs walls being considered by developed countries.

At the same Committee on Trade and Environment meeting, China introduced a proposal to deepen multilateral discussions on the trade aspects and implications of environmental measures with wide ramifications.  China suggested that members start discussions on CBAM at the June CTE meeting.

“Trade policies designed to achieve environmental objectives should be consistent with the fundamental principles and basic rules of the WTO, strike a balance between environmental considerations and trade considerations, and do not constitute protectionist measures or green trade barriers,” China said.

While China has obliquely dubbed the EU carbon tax as a protectionist measure, the country has been the subject of debate for a similar proposal that seeks to restrict the export of critical technology related to solar photovoltaic components.

Responding to China’s move, the EU said it would study the proposal, noting that it has been responding to members’ questions in recent years and intended to hold a dedicated information session in the coming months.

The EU also said CBAM will be subject to the EU’s internal legislative process, which will be finalized in May 2023.

India has maintained that any measures taken to combat climate change should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade.