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KEYWORDS: Free Trade Agreement, Provisions, CBAM

According to three Indian sources, India is concerned about a potential levy by Britain on imports of high-carbon products like steel. It wants a mechanism in its proposed free-trade agreement (FTA) to handle concerns emerging from such a policy.

Britain started talking to domestic stakeholders earlier this year about policies like a possible carbon border tax that would resemble the EU’s carbon border adjustment mechanism (CBAM). According to Indian officials, India now wants provisions in the proposed free trade agreement (FTA) requiring Britain to have bilateral talks with New Delhi if a measure akin to the CBAM is enacted.

Two officials from the UK side claim that because no decision has been made about introducing such a measure, the UK side views this request as “unfair”. Trade partners like India are uneasy about the EU’s CBAM, the world’s first tariff regime on cheaper imports of foreign polluting products, which went into effect in October. India intends to challenge the EU’s CBAM in the World Trade Organization.

The three Indian government sources declined to be identified since the trade agreement talks with the UK are private. An email for a response was not answered by the Trade Ministry of India.

“The UK and India continue to work towards an ambitious trade deal that works for both countries,” stated the British Department for Business and Trade. The India-UK Free Trade Agreement has encountered multiple obstacles during the negotiation process, resulting in the ambitious agreement being delayed by more than a year from its original date.

A carbon tax: what is it?

One type of polluter pays taxation. It levies a tax based on the quantity of carbon emitted during combustion on fossil fuel production, consumption, and distribution. It is an inexpensive way to lessen the environment’s emissions of greenhouse gases. Like a Pigouvian tax, it is. Its basis is the idea that “polluter pays.” The ultimate goal of a carbon price is to reduce and eventually eliminate the use of fossil fuels.

Because different fuels have different carbon contents, the carbon tax will vary for each fuel. The amount of carbon dioxide released is directly related to the fuel’s carbon content. Fuel taxes will be computed using the British Thermal Unit (Btu) heat unit. Volume or weight will not be used to determine it. The goal is to encourage the use of fuels that are less harmful to the environment.






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