Carbon Border Adjustment Mechanism (CBAM)

 The European Union (EU) has introduced

the CBAM as part of its eff orts to achieve

a 55% reduction in greenhouse gas

(GHG) emissions by 2030 compared to

1990 levels, under the European Green

Deal.

 The CBAM aims to prevent carbon

leakage, where carbon-intensive

production could move from the EU to

non-EU countries with lax environmental

regulations.

 From January 1, 2026, the CBAM will

enter the defi nitive phase, requiring

importers to surrender annually the

corresponding number of CBAM

certifi cates based on the actual declared

carbon content embedded in the goods

imported to the EU.

 India is among the top eight countries

that will be adversely aff ected by

CBAM, with sectors like steel expected to be greatly impacted.

 India’s options to navigate CBAM include challenging it as violative of the common but diff erentiated

responsibilities principle under the Paris Agreement and negotiating with the EU to collect the tax

and return funds for green technologies.

 The EU has not considered other factors like the availability of cheap labor and production

opportunities in diff erent geographies that might lead EU industries to shift production

outside the EU.

 India needs to formulate its own carbon taxation measures aligned with the principles of the

Paris Agreement while safeguarding its industries’ interests to respond to the CBAM and similar

measure

UPSC with Shivaji kale