On carbon burden, Europe’s glaring hypocrisy

Source: The post is based on the article “On carbon burden, Europe’s glaring hypocrisy” published in “The Indian express” on 27th July 2023.

Syllabus: GS2- Effect of policies and politics of developed and developing countries on India’s interests. & GS3- Environment conservation

News: The European Union (EU) is starting a carbon tax on imports to fight climate change. This may hurt trade with countries like India. Big companies can adapt, but it may raise prices for consumers. India should create its own system to price carbon and protect its interests. The EU’s approach seems unfair, and India needs to respond strategically.

How will India be impacted by the European Union’s carbon tax?

Trade Concerns:

EU is a big trading partner for India.

26.4% of India’s exports could be affected by the carbon tax.

Products like steel, which India exports to the EU, will face this tax.

Business Implications:

Large Indian companies, like Tata Steel, may have to adapt quickly.

Tata Steel is already transitioning to green steel for the EU market.

Cost Implications:

The carbon tax might raise product costs.

Tata Steel suggests these costs could lead to higher steel prices or require subsidies.

Competitive Pressures:

Bigger companies might manage, but smaller ones could struggle.

This might change the structure of India’s manufacturing sector.

What actions should be taken in response?

Actions in Response to the EU’s Carbon Tax:

Challenge at WTO: India can contest the carbon tax at the World Trade Organization as being discriminatory.

Internal Carbon Pricing: India could develop its own system to price carbon.This would align with its developmental needs and global responsibilities.

Support for Businesses:

Help companies like Tata Steel that are already transitioning, using their experience as a model.

Consider incentives to encourage green transitions within the business sector.

Consumer Protection: Implement mechanisms to prevent high costs from being passed onto Indian consumers.

Negotiate with the EU:

Engage with the EU to find an agreeable middle ground on carbon pricing.

Emphasize “common but differentiated responsibility”, meaning India can price carbon based on its developmental stage.

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