India-EU: global dynamics

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India-EU: global dynamics

  • The European Union is at the forefront of commitment to net-zero aiming to become the first carbon-neutral region in the world by 2050.
  • European Union Green Deal: To transform EU society into a fair and wealthy one with a modern, resource-efficient and competitive economy.

CBAM: carbon-pricing system

  • ‘Fit-for-55’ package: Communication of EU’s 2030 climate targets introduced Carbon Border Adjustment Mechanism (CBAM) - a carbon-pricing system proposed for imports into the EU.
  • Mechanism: taxing imported goods based on the difference b/w carbon used in production of domestic and imported goods.
  • In the initial phase, five CITE (Carbon Intensive and Trade Exposed) sectors such as iron and steel, aluminum, cement, fertilizers and electricity will be taxed under CBAM.
  • Objective:
  • Reduce carbon leakage
  • Create a level playfield for EU producers
  • Encourage producers in other countries to adopt cleaner technologies.


  • Legality of CBAM pointing its conflict with World Trade Organization (WTO) and United Nations Framework Convention on Climate Change (UNFCCC) norms
  • It encourages protectionism.
  • Shrimp-Turtle Case and Air Transport Association of America vs Energy Secretary Case for Energy and Climate Change

India-EU trade relation

  • EU is India’s third largest trading partner, while India is EU’s 11th largest trading partner.
  • 2019-20: India-EU trade accounted for 11.1% of total Indian trade in goods
  • 1.9% of EU’s total trade in goods(2020) came to India.
  • India exports almost 14% of its global exports to the EU.

Progressive steps

  • India and EU both are committed to climate change.
  • Recent progress in India-EU alliance opens prospects of a customised partnership and mutual growth.
  • Rather than tax on exports to EU as proposed in CBAM, both can invest in cleaner and greener technologies in India and help in cleaning up production in India.
  • Such partnership will ensure that both India and EU have their agendas of economic growth and sustainability fulfilled.

Prelims Take Away

  • EU
  • WTO
  • CBAM