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.
Concerns:
- 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
- UNFCCC
- CBAM