India and the European Union (EU) seem to be closing in on a dispute with the continental bloc trying to doubly punish the nation with its carbon tax and Finance Minister Nirmala Sitharaman voicing disapproval to the Carbon Border Adjustment Mechanism (CBAM). As per FM, both India and the EU are in the process of transitioning towards greener industries and making investments in sustainable assets.

The CBAM is poised to enter a transition phase starting October 1. During this phase, EU importers of carbon-intensive products such as cement, fertiliser, steel and aluminum will need to report the embedded emissions of their imports. However, they won't be required to make any financial adjustment at this stage. The transition phase marks a crucial step in the implementation of CBAM, allowing for reporting and assessment of emissions associated with imported goods.

India's exports are expected to be hit by the EU’s 20 percent to 35 percent tariffs on high-carbon goods. The full implementation of the CBAM is slated for January 2026, meaning that from that point onward, a levy will be imposed on imported products covered by CBAM. The aim of CBAM, as outlined by the EU, is to establish a fair price for the carbon emissions associated with the production of carbon-intensive goods entering the EU.

The FM stressed on the need for the EU to take New Delhi’s concerns into account, suggesting that other countries may not view the CBAM favourably if India's concerns are not adequately addressed.

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