Carbon Tax Threatens India-EU FTA: CBAM Looms Large for Exporters

• India-EU FTA talks face hurdles due to EU's Carbon Border Adjusted Mechanism (CBAM), delaying conclusion beyond 2025.
• CBAM, effective January 1, 2026, imposes a carbon tax on imports like steel and aluminum to ensure 'cleaner' production.
• India, a major steel producer, opposes CBAM as a non-tariff barrier, arguing it undermines WTO principles and impacts US$8 billion in exports.
• India's Carbon Credit Trading Scheme (CCTS) aims to incentivize decarbonization, but needs more ambitious targets for effectiveness.
• India must adapt by strengthening CCTS, exploring new markets, and decarbonizing industries to mitigate CBAM's impact.

Why It Matters: EU's carbon tax (CBAM) is a major non-tariff barrier for India-EU FTA, demanding strategic adaptation from India.