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US Probe Into EU Carbon Tax Could Benefit India
The European Union has a rule that can charge extra fees on some imported goods based on the pollution made when they were produced.
The United States has started investigating how this rule affects American small businesses.
It is asking those businesses to share comments by November 9.
India also sells goods such as steel and aluminium to Europe, so the rule could make those exports more expensive.
A trade research group estimates the charge could be 20–35% on some products.
India’s trade deal with the EU includes a clause that may let India receive the same special treatment the EU gives the United States.
Indian steelmakers mostly use a production method that creates more emissions than some alternatives.
India plans to increase the use of scrap steel and electric arc furnaces, but scrap supplies are limited.
The USTR opened an investigation into the EU’s expanded Carbon Border Adjustment Mechanism and invited public comments from US small businesses through November 9.
CBAM requires EU importers in covered sectors to report imported goods’ embedded emissions and applies a carbon price intended to match that paid by EU producers.
The USTR says EU default emissions values include a punitive mark-up, while company-level emissions data must be verified by an EU-accredited verifier.
GTRI estimates CBAM could impose a 20–35% tax on selected imports and hurt Indian iron, steel, and aluminium exports to the EU.
India’s forward-MFN clause in its EU trade deal could let Indian exporters receive any CBAM flexibilities the EU grants the United States.
- Who
- The United States Trade Representative (USTR), the European Union, and India’s exporters and trade negotiators.
- What
- The USTR has opened an investigation into the EU’s expanded Carbon Border Adjustment Mechanism and is seeking public comments.
- Where
- The measure concerns imports into the European Union and trade between the EU, the United States, and India.
- When
- The investigation began this week; comments from US small businesses are invited until November 9.
- Why
- The USTR is examining the effects of the EU carbon pricing mechanism, including its emissions calculations and treatment of small businesses.
USTR and US concerns
EU’s stated rationale
CBAM’s emissions calculations
USTR and US concerns
The USTR says the EU adds a punitive mark-up to default emissions values to encourage companies to provide their own data, which must be verified by an EU-accredited third party.
EU’s stated rationale
The EU says the mechanism aims to apply to imports a carbon price equivalent to the one EU producers pay, using default values based on country- and sector-level production and energy data.
Flexibility for businesses
USTR and US concerns
The USTR has raised concerns about the treatment of US small and medium-sized businesses and is seeking public comments from US small businesses.
EU’s stated rationale
The European Commission has committed to work on additional CBAM implementation flexibilities for US small and medium-sized businesses, alongside an increase in the de minimis exception.
Key facts
- Covered sectors
- Aluminium, cement, electricity, fertiliser, hydrogen, and iron and steel.
- Comment deadline
- November 9 for public comments from US small businesses.
- Estimated impact
- GTRI estimates a 20–35% tax on selected imports into the EU.
- India’s steel feedstock
- Scrap accounts for about 20% of India’s steelmaking feedstock.
- Domestic scrap availability
- ICRIER estimates approximately 25 million metric tons annually.
- Potential benefit for India
- A forward-MFN clause in the India-EU trade deal could extend to India concessions offered by the EU to the US.
Quotes
United States Trade Representative
The US government office responsible for trade policy.
“The EU calculates the default values using country- and sector-level production and energy data to estimate the emissions intensity across countries and sectors. However, the EU adds a punitive mark-up that increases the overall values, in order to encourage the use of company-level data. CBAM requires that any company-level data provided must be verified by an EU-accredited third-party verifier.”
indianexpress.com
“Taking note of the US concerns related to treatment of US small and medium-sized businesses under CBAM, the European Commission, in addition to the recently agreed increase of the de minimis exception, commits to work to provide additional flexibilities in the CBAM implementation.”
indianexpress.com
Sources
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