The United States Trade Representative (USTR) has initiated an investigation into the European Union’s Carbon Border Adjustment Mechanism (CBAM). This carbon pricing system requires EU importers to declare the embedded emissions of certain products, aiming to match the carbon price paid by EU producers.
The USTR is seeking public comments from American small businesses on the matter. This action follows difficult negotiations between India and the EU regarding CBAM, which is anticipated to affect India’s metal exports. However, any flexibility introduced by the US could benefit Indian exports, especially given a ‘forward-Most Favoured Nation’ Clause secured by India in its trade deal with the EU.
Estimates suggest CBAM could impose a 20-35% tax on select Indian metal imports to the EU. Indian manufacturers, who often use production methods with higher emissions, are reportedly underprepared. The government has plans to increase steel production using scrap and electric arc furnace technology as part of a ‘green steel initiative’.
A report highlighted that while scrap steel is crucial for decarbonization, India’s limited domestic availability of quality scrap presents a significant challenge, acting as a bottleneck in the transition towards greener steel production amidst increasing climate-linked trade measures.
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Source: indianexpress.com
