CBAM could have broad impact on India’s trade – study

Estimates of the impact on steel exports to the EU vary widely

The European Cross-Border Carbon Adjustment Mechanism (CBAM) has the potential to have a broad impact on India’s trade and employment in carbon-intensive sectors. This is stated in a study by the Center for Social and Economic Progress (CSEP), according to The Economic Times.

The study highlights several different estimates describing the potential impact of the CBAM on India’s exports to the EU, especially in sectors such as steel, cement, and aluminum. For example, one estimate suggests that the mechanism will lead to a 58.5% drop in Indian exports of ferrous metals to the EU. In contrast, there is an estimate that Indian sectors covered by CBAM will be only marginally affected.

Analysts warn of potential problems for Indian industry, which is heavily dependent on the EU market. The CBAM could result in higher costs for Indian exporters, leading to trade diversion and reduced competitiveness. In addition, it is noted that other countries may introduce similar mechanisms, which will further complicate the dynamics of world trade.

CSEP, in particular, recommends that India develop a domestic carbon pricing policy to align it with international standards. It also emphasizes the importance of introducing a revenue recycling strategy to compensate for potential economic disruptions and support technological progress in affected industries.

As GMK Center rpeorted earlier, the European CBAM is being opposed by a number of economies. The mechanism of cross-border carbon adjustment pits the development of the industrial potential of poorer countries against the EU’s decarbonization goals, The Economist notes.