Carbon tax India: Power is meaningless if not put to use at the right time. Under successive governments, India punched below its geopolitical weight. These governments kept assuming that non-exercise of power would earn them global clout. In the past few years, the Indian government has responded in kind to nations that try to get off on the wrong foot with India.
One example of this is the Malayan President Mahathir Mohammad’s vile rhetoric at the United Nation. Within no time, India ditched Malaysia’s palm oil, and the rest, as they say, is history, just like the old man Mahathir. Now, it seems that the largest economic block, that is, the European Union, tried to play smart with India and ended up screwing big time.
EU imposes “Carbon Tax” on India
On December 13, 2022, the European Union made a new rule called the Carbon Border Adjustment Mechanism (CBAM). They claim that the rule will put a “fair” price on carbon-intensive goods that come into the EU. The goal is to encourage cleaner industrial production in “non-EU countries.” In line with the political agreement, the CBAM will start its transitional phase on October 1, 2023. While the long-term system will come into effect on January 1, 2026.
So, what this basically means is that from the 1st of October, exports of iron, steel, and aluminum products to EU member nations will be subjected to increased regulation as per this CBAM mechanism, popularly known as the “carbon tax.” Additionally, from January 1, 2026, exporters will be required to declare greenhouse gas emissions that are included in their exports before taxes are imposed on these goods.
However, this EU proposal has started trade tensions with the rest of the world. It has angered developing nations. Metal producers in India are worried that CBAM will create a new trade barrier for exports to Europe.
The Indian government termed this “unjustifiable discrimination.” India added that this carbon tax goes against generally accepted guidelines that allow greater flexibility for developing nations in their fight against climate change. Deep down, these Western nations also know that developing countries are not historically responsible for creating the climate catastrophe.
In fact, it’s the US and other western nations that are guilty of committing crimes against the environment and polluting it. Instead of taking the blame for their climate sins, they pass the blame on developing countries. But Prime Minister Modi has categorically called out this hypocrisy of the West.
Recently, in the Foreign Ministers meeting in the G-20, PM Modi remarked that developing nations are most affected by global warming ‘caused by richer countries.’
Earlier in April 2021, Brazil, Russia, India, China, and South Africa collectively condemned the CBAM policy as discriminatory. But as they say, requests and words have less impact on hypocrites, especially in the EU and western nations. This is why India decided to play hardball with the EU and impose counter-tariffs on exports from the EU.
Evidently, media reports suggest that India has taken a tough stance against the EU’s moral high ground on climate change and attempted to punch down developing nations. Reports claim that India has decided to take every step possible to safeguard the interests of its metal producers. These reports further claim that India is strongly considering the idea of imposing retaliatory tariffs on exports from the EU in response to the bloc’s carbon tax.
A senior government official stated that India would also consider imposing tariffs on products coming from the EU. If India allows the EU’s carbon tax to go through, it will run down India’s metal exports to the EU, which are worth over $8 billion.
The fact that India is considering imposing counter-tariffs is a clear sign that India will not allow the EU to dictate terms, especially in the fight against climate change. In this area, Europe has no right to take the moral high ground and impose economic penalties on developing nations for things it did on a gigantic scale.
The EU’s carbon tax also goes against the principles agreed upon under the Paris agreement. Developed countries have generated nearly 79% of historical carbon emissions. And under the Paris Agreement, they agreed to bear a greater burden for climate mitigation.
The GTRI report noted, “CBAM goes against the principle of common but differentiated responsibilities accepted in the Paris Agreement. It imposes the environmental standards of developed countries on developing countries. Instead of helping, the EU will now collect revenue from developing countries through the CBAM mechanism. The EU will use this money as a budgetary resource and not for helping developing countries with climate adoption”. After learning of India’s tough stance on CBAM and the idea of imposing counter-tariffs on their exports, the EU buckled under pressure.
When reports of counter-tariffs emerged, the EU was quick to control the damage and correct its course. The EU announced that it is willing to collaborate with India to ease the administrative burden while enforcing its CBAM.
An EU official said, “We are keen on continuing fruitful discussions with the government of India and Indian industry. We would like to have an open conversation in view of the common objective to reduce greenhouse gas (GHG) emissions globally, and we are ready to facilitate the understanding and implementation of the system as much as possible.”
These reports clearly highlight that playing smart with India and harming India’s interests will not be taken lightly and will have countermeasures put in place to bring the erring nation on line. This applies in economic as well as security aspects, as the same strong actions are being witnessed while signing trade agreements with foreign nations.
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