Prelims Perspective: What needs to be learned?

  • What is it?
  • Target
  • Sectors Covered
  • Impact of Carbon Border Adjustment Mechanism (CBAM) on India

Mains Perspective: Notes need to be prepared

  • International Trade (GS 2 – International Relations)
  • Climate Change Mitigation (GS 3- Environment)

What needs to be known?

  • Carbon Border Adjustment Mechanism (CBAM)
    • What is it?: It is European Union tariff policy on mports of high-emission goods, ensuring foreign producers face equivalent carbon costs to EU domestic ones.
    • Target: CBAM prevents undermining of EU climate goals under the “Fit for 55” package, which targets a 55% emissions cut by 2030 and net-zero by 2050.
    • Sectors Covered: Initially covers cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen—sectors at high risk of carbon leakage.
  • Impact of Carbon Border Adjustment Mechanism (CBAM) on India
    • Higher export cost for Indian carbon-intensive products (iron & steel, aluminium, cement, fertilisers).
    • Loss of price competitiveness in the European Union market.
    • Compliance burden due to complex carbon measurement, reporting and verification (MRV).
    • MSMEs most affected because of limited technical and financial capacity.
    • Trade diversion risk as EU buyers may prefer low-carbon suppliers.
    • Perceived green protectionism raises concerns for developing countries.
    • Contradicts CBDR principle (Common But Differentiated Responsibilities).
    • Push towards decarbonisation of Indian industry in the long run.

Source: Down To Earth