India, EU & Carbon Tariff: CBAM Impact & FTA Talks

New Delhi, Jan 28 (PTI) India and the European Union (EU) broadly agreed on a set of measures to deal with the 27-member's bloc's regulation on carbon-intensive imports including funding to ensure carbon reduction and the creation of a technical working group to address challenges, official sources said on Wednesday.

From January 1, the EU has started implementing the world's first carbon tariff under its Carbon Border Adjustment Mechanism (CBAM) which is a framework for tax on carbon-intensive products such as steel, cement and aluminium.

The two sides are looking at signing a memorandum of understanding (MoU) that will provide for the EU working with New Delhi to help Indian industries reduce their carbon footprint.

The EU will provide technical assistance, technology and funding to ensure carbon reduction and has committed around USD 500 million for the first two years under this initiative, the sources said.

The CBAM was as one of the most contentious issues in negotiations for the free trade agreement (FTA) between India and the EU that was concluded by the two sides on Tuesday.

The EU has already clarified that it will not be able to give any concessions under CBAM arguing that the regulations under it are applicable to all foreign partners as well as to European domestic industry.

Both sides agreed to create a technical working group to ensure complete visibility on how the carbon footprint is measured and the tariff is calculated in order to resolve outstanding issues, the sources said.

The Indian side ensured that Indian verifiers will be accredited by the EU to audit any firm's carbon footprint as there will be problems of cost and access if verifiers are located only in Europe, they said.

The EU also agreed to New Delhi's proposal that if the bloc shows flexibility to any country under CBAM, the same flexibility will automatically apply to India, they said.

The sources said India's policy to incentivise firms reducing emissions as well as levies collected under it will be accounted for under CBAM to ensure there is no double tariff on Indian industry.

We have kept it as a living dialogue so that any other measure arising [in future] can be taken on board, one of the sources said.

They also listed the mobility partnership with the EU for Indian students and professionals as a key outcome.


The mobility commitments as one the best ever by the EU, covering intra-corporate transfers, contractual service suppliers, independent professionals and trainees, they said.

Under the provisions agreed by the two sides, Intra-corporate transfers will be allowed across all sectors of services, with the initial duration of stay being three years, which can be extended by two years.

Spouses and dependents of intra-cooperative transfers will also be covered, the sources said.

The provisions related to contractual service suppliers will apply to 37 sectors and those for independent professionals to 17 sectors, including key sectors of interest to India such as IT and business and professional services, they said.

Under the provisions, mobility of students will be allowed without restrictions, and they will be allowed to take up post-study work opportunities. "The current trajectory shows an uptick in students going to Europe and this trajectory will get a boost because the framework will provide more certainty and predictability," one of the sources said.

The sources said both India and the EU are committed to signing and ratifying the FTA as quickly as possible, though the process of legal scrubbing and ratification may take some time.

There is a political commitment on both sides to expedite this. Our teams will work on both sides to see how we can expedite this process, the sources said.

Recent contacts with all key stakeholders lead us to believe there's a commitment from the EU side to get this done in an accelerated time frame, they said.

The India-EU free trade agreement that will account for almost a quarter of the global GDP will reduce tariffs on 99 per cent of Indian exports to the EU and cut duties on over 97 percent of the EU's exports to India.

The EU estimated that the deal will cut up to four billion euros in annual tariffs for European exporters.

Indian sectors such as textiles, apparel, leather goods, handicrafts, footwear and marine products are set to gain from the FTA, while Europe is set to benefit in areas of wine, automobiles, chemicals and pharmaceuticals, among others.

Under the provisions of the pact, the EU's wine exports will benefit significantly as the current duties of 150 per cent will see a sharp cut and the new levies will be in the range of 20 percent to 30 per cent.