Chief Economist Criticizes EU's Carbon Tax, Calls for Fair Climate Measures
New Delhi: Chief economic adviser V Anantha Nageswaran on Thursday said that measures like the carbon border adjustment mechanism or CBAM, taken by developed nations to combat climate change, are unfair towards developing economies. The European Union has decided to impose a carbon tax on products from certain sectors like steel, cement from countries like India and China.
The carbon tax is expected to come into effect from January 1, 2026, but during the trial period, which started on October 1, 2023, companies from seven carbon-intensive sectors, including steel, cement, fertiliser, aluminium and hydrocarbon products, have to share emissions data with the EU. “By taking actions against climate change, developing countries are also ensuring the lives and properties of the people and businesses in the developed world...If so, what is the premium they are getting in return for taking action on their part to ensure economic activity in the developed world?” Nageswaran wondered.
“Obviously, the kind of premium that the developed world is contemplating paying to the developing world cannot be CBAM. It has to be something more positive than that,” he said at the Regional Workshop on Climate Finance organised jointly by the department of economic affairs and Asian Development Bank.
The carbon tax by the EU may affect the profitability of Indian exporters as Europe is among the top import destinations for India. The country’s total trade with the EU was $134.71 billion in 2022-23, with imports worth $59.87 billion and exports at $74.84 billion. From developing countries' perspective, he said, the best insurance against climate change is continued economic growth.
The world faces a recurring set of hazards, including through climate change that repeatedly put its people and businesses at high risk of lost assets, health, livelihoods, or even lives. Countries often fail to tap well-proven financial coping mechanisms, such as insurance schemes, that could boost resilience against such hazards.
