NEW DELHI: The India-European Union Free Trade Agreement (FTA) has adequate safeguards to protect Indian companies from the impact of the European bloc’s Carbon Border Adjustment Mechanism (CBAM), while ensuring that domestic exporters benefit from any future relaxation in the carbon tax regime, a senior commerce ministry official said on Thursday.
“CBAM took a lot of negotiating capital… In the text, there is a separate annexure on dealing with CBAM. The first pillar is that in case of flexibility in future in (CBAM), that will be available to India,” Additional Secretary in the Department of Commerce Darpan Jain said at Indo-German Chamber of Commerce (IGCC) Industry Dialogue. Jain also is the Chief negotiator of India-EU FTA.
CBAM compliance has been a major concern for small and medium enterprises (SMEs), particularly regarding verification processes, calculation of embedded carbon in products and ensuring that verifiers are recognised by European Union authorities.
The agreement also provides for engagement between India and EU authorities to account for the carbon price paid in India and adjust it against the final carbon tax liability payable in the 27-member bloc.
“India is currently developing its own carbon pricing mechanism. So, how to offset what is paid in India from what is paid in Europe, so even that is part of it,” he said.
“There is a comprehensive work plan under annexure on CBAM in FTA and we are working on it and I am very hopeful that SMEs will not face any problem,” Jain added.
The EU’s CBAM, which came into effect on January 1, imposes a carbon tax on imports of carbon-intensive products such as steel, aluminium, fertilisers and cement where emissions during production exceed the threshold set by the bloc. At present, the mechanism applies to steel and aluminium products.
India and the EU announced the conclusion of negotiations for the FTA on January 27. Jain said the legal review of the agreement has been completed and the text will now be placed before the European Council, the EU’s top political body.
Following approval by the council, the agreement will be signed and then sent for ratification by the European Parliament.
According to the agreed timeline, the pact could be signed by the end of this year and become operational early next year. “Both sides are keen to bring it into force as early as possible,” Jain said.
Source: The Financial Express
