(MENAFN- KNN India)
New Delhi, Dec 24 (KNN)
A comprehensive study by the Centre for Social and Economic Progress (CSEP) reveals that the European Union's Carbon Border Adjustment Mechanism (CBAM) could substantially impact India's export-oriented industries, particularly in carbon-intensive sectors.
The research, utilising a specialised Computable General Equilibrium model, projects that India's iron and steel exports to the EU could plummet by up to 58.5 per cent, marking one of the most significant trade impacts among affected nations.
The CBAM, which entered its transitional phase in October 2023 and will be fully implemented by 2026, requires EU importers to pay for the carbon emissions embedded in imported goods.
This mechanism aims to create a level playing field between EU and non-EU producers while preventing carbon leakage.
However, the policy poses considerable challenges for Indian industries that have traditionally relied on the European market, potentially leading to increased costs and reduced competitiveness.
The study highlights broader implications beyond direct trade effects, suggesting that the mechanism could trigger similar carbon pricing policies in other regions, fundamentally reshaping global trade patterns.
In response to these challenges, CSEP recommends that India develop domestic carbon pricing policies to align with international standards and implement revenue recycling strategies to support affected industries.
The research emphasises the need for strategic interventions, including investments in low-carbon technologies and engagement in international negotiations to address CBAM's impacts.
As global climate policies continue to evolve, the study urges Indian policymakers to adopt proactive measures that balance economic interests with environmental sustainability, particularly in sectors like cement and aluminium that face significant exposure to EU markets.
The findings underscore a critical juncture for India's trade policy, suggesting that while CBAM presents immediate challenges, it also offers opportunities for industrial transformation toward more sustainable practices.
The study's detailed economic modeling provides policymakers with crucial insights for developing targeted responses to these emerging trade dynamics.
(KNN Bureau)
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