India’s Finance Minister, Nirmala Sitharaman, has voiced strong criticism against the European Union’s Carbon Border Adjustment Mechanism (CBAM), describing it as “unilateral and arbitrary.” Speaking at the Financial Times Energy Transition Summit, she expressed concerns that such policies, coupled with the EU’s deforestation law, could hinder India’s efforts to transition to green energy. Sitharaman highlighted that these measures could create significant trade barriers, particularly for key industries like steel and aluminum.
India, while committed to meeting its environmental goals, faces a major challenge with the CBAM. With over 25% of its iron, steel, and aluminum exports destined for the EU, the carbon tariffs could increase export costs by 20 to 35%. The EU’s demand for detailed data on production methods, potentially involving up to 1,000 data points, has raised concerns about competitiveness and the protection of sensitive business information.
Sitharaman also pointed out the EU’s Deforestation Regulation, which could disrupt global supply chains and raise costs for developing nations like India. These regulations could add financial pressure to countries already striving to meet their Nationally Determined Contributions (NDCs). In response to global pushback, the European Commission has proposed delaying the Deforestation Regulation by a year.
Despite these hurdles, Sitharaman emphasized India’s dedication to sustainability, showcasing initiatives like the Production Linked Incentive (PLI) scheme for green energy and the PM Surya Ghar Muft Bijli Yojana. India remains focused on achieving its goal of carbon neutrality by 2070, provided green investments continue.
While challenging, India is committed to addressing these issues without derailing ongoing negotiations for a free trade agreement (FTA) with the EU.
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