India writes to WTO against Carbon border tax; here's all you need to know

India has written to WTO raising concerns over selective application of carbon border rules to trade-exposed industries like steel, aluminium, chemicals, plastics, polymers, chemicals and fertilisers

India in a submission to the World Trade Organisation (WTO) last week has slammed carbon border measures being imposed by some countries, calling them discriminatory and protectionist, the Economic Times reported.
 

India has written to WTO raising concerns over the selective application of Carbon border rules to "trade-exposed industries" like steel, aluminium, chemicals, plastics, polymers, chemicals and fertilisers, which reflects the underlying competitiveness concerns driving such measures, the report said.
 

According to the WTO rules, it is mandatory that there is non-discriminatory treatment for same products, irrespective of their production methods and such border measures can lead to "behind-the-border" protectionist practices, India said.
 

"Any measures taken to combat climate change, including unilateral ones, should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade," India's submission to WTO said.
 

This statement from India comes at a time when the US introduced an Inflation Reduction Act to establish green technology industries. The European Union (EU) too has a Carbon Border Adjustment Mechanism which is a global carbon tax levied on imports to the bloc.
 

Emphasising the importance to follow the principles of equity and common but differentiated responsibilities and respective capabilities, and the nationally determined contributions (NDCs), India told the WTO that "Carbon border measures that are being considered for imposition on imported products effectively amount to prioritising a singular policy of the importing country over those of exporting countries and will amount to imposing a unilateral vision of how to combat climate change," the report said.

India wrote that "not only will such measures undermine the multilaterally agreed mandate of NDCs of the country of export, but also create distinct preferential treatment for domestic over imported goods,"
 

What are Carbon Border measures?
 

A few developed countries have imposed high costs on carbon-intensive businesses in their own countries to reduce emissions. 
 

However, it was found that businesses could overcome these restrictions by moving production to developing countries where the norms are less strict. This is known as carbon leakage. To curb these the countries started imposing Carbon Tax at borders.

One such instance is the EU's Carbon Border Adjustment Mechanism (CBAM). 
 

EU defines CBAM as a "landmark tool to put a fair price on the carbon emitted during the production of carbon-intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries."
 

It is like a carbon tax on goods entering the EU from other countries. India's concern is that these border taxes on its goods entering EU would increase the prices of Indian-made goods and make them less attractive to buyers and could negatively affect demand.
 

Such a tax could pose a serious threat to companies with larger greenhouse gas footprints.
 

India along with other BASIC countries (Brazil, South Africa, India and China) raised this issue in November last year at the COP27 in Sharm El Sheikh, saying it could “result in market distortion”.
 

At COP 27, Bhupendra Yadav, India's Environment Minister said that ‘just transition’ to cleaner sources of energy did not mean that all countries should strive for the same level of decarbonisation. “For India, just transition means the transition to a low-carbon development strategy over a time scale that ensures food and energy security, growth, and employment, leaving no one behind in the process,” he said.