Why in the News?

India has called protectionist policies like the EU’s Carbon Border Adjustment Mechanism (CBAM), Corporate Sustainability Due Diligence Directive, and Deforestation Regulation as  “unfair” and “unjust”.

How will the CBAM impact India’s key industries and overall trade?

• Disruption to Trade: CBAM could significantly affect India’s exports to the EU, especially sectors like iron, steel, aluminum, cement, and fertilizers, which account for a large portion of India’s trade with the EU.
• Increased Export Costs: The new requirements under CBAM, such as carbon emission certificates, will likely increase production costs for industries, making them less competitive in the global market.
• Risk to Iron and Steel Industry: As iron and steel make up 76.83% of India’s exports affected by CBAM, this sector could face the greatest challenge in terms of compliance and potential cost increases.
• Economic Strain on Developing Economies: The additional burden of having to meet emissions standards without corresponding support or time for transition may lead to economic difficulties for India’s industries.

What strategies can India employ to effectively challenge the CBAM?

• Coordination with Other Developing Countries: India should align its arguments with other developing economies to present a unified stance, ensuring a coordinated response to the EU-CBAM that reflects shared concerns.
• Arguing for Adequate Time for Adaptation: India can argue that developing nations should be given sufficient time to adapt to the CBAM, similar to the EU’s phased climate targets, to avoid disproportionate burden.
• Revenue Sharing: India can advocate for the EU to share the revenues generated from CBAM with non-EU countries to support capacity building, technology transfer, and emission reduction initiatives in developing nations.
• Equity-Based Accounting (EBA) Proposal: India can push for a more equitable framework for emission reductions, suggesting the adoption of an EBA that takes into account historical contributions to climate change, trade benefits, and the developmental needs of nations.
• Highlighting the CBAM’s Discriminatory Nature: India should emphasize that CBAM imposes an unjust transfer of climate responsibilities to developing countries without considering their economic realities or historical emissions.

What role does International cooperation play in addressing the challenges?

• Global Coordination on Climate Action: India should work with other developing countries to demand a more inclusive global framework for addressing climate change, ensuring that the impacts of mechanisms like CBAM are shared equitably.
• Technology and Knowledge Sharing: International cooperation can facilitate the transfer of green technologies, which would help developing nations meet emissions targets without stifling their economic growth.
• Addressing Historical Responsibilities: Cooperation with other nations can strengthen calls for addressing historical emissions and providing the necessary financial resources to developing countries to adapt to climate policies like CBAM.
• Leveraging Multilateral Platforms: India can use international platforms such as the UNFCCC and COP discussions to engage with other nations and challenge policies that disproportionately affect developing economies.

Conclusion: India should actively engage with other developing countries and form a coalition to present a unified front against the discriminatory nature of CBAM. This could involve joint lobbying at international forums such as the UNFCCC and COP summits.

Mains PYQ:

Q Describe the major outcomes of the 26th session of the Conference of the Parties (COP) to the United Nations Framework Convention on Climate Change (UNFCCC). What are the commitments made by India in this conference?  (UPSC IAS/2021)

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