European CBAM will cost India 0.05% of GDP – analysts

Exports of goods to EU covered by CBAM accounted for 9.91% of India's total exports to the bloc in 2022-23

The European Carbon Border Adjustment Mechanism (CBAM) may cost India 0.05% of GDP. This is stated in a report by the independent think tank Center for Science and Environment (CSE), Business Standard reports.

The report focuses on the response of the Global South to the change in the trade regime in the era of climate change, and its conclusions are based on data from the last three years (from 2021 to 2024).

According to Avantika Goswami, who leads CSE’s climate change program, exports of goods to the EU, which are covered by the CBAM, accounted for 9.91% of India’s total exports to the bloc in 2022-2023.

According to her, 26% of India’s aluminum exports and 28% of iron and steel exports were destined for the EU market in the period. These sectors dominate the basket of goods that India supplies to the bloc and are subject to CBAM.

At the same time, in 2022-2023, exports of goods to the EU covered by the cross-border carbon adjustment mechanism accounted for about a quarter (25.7%) of the total volume of such goods that India shipped globally, which is important for industries operating in these sectors.

Sunita Narain, Director General of CSE, emphasized the need for climate justice in trade policy. She noted that measures such as CBAM are unilateral. Developed countries, which have historically emitted more greenhouse gases, place the financial burden of transition to cleaner technologies on developing countries. According to her, this is of particular concern, as such measures could further damage the economies of the South, limiting their ability to decarbonize.

As GMK Center reported earlier, up to a third of Ukraine’s exports to the EU will be subject to the CBAM. According to GMK Center’s estimates, the introduction of the mechanism will result in a loss of 1.6 million tons of Ukrainian exports of long products and semi-finished products to the EU, as well as 1.4 million tons of pig iron. Financial losses for the steel and mining industry could amount to about $1.4 billion a year. Therefore, Ukraine needs to intensify negotiations with the bloc on this issue.