India declines to accept EU carbon tax proposal, says it’s ‘not practical’

Ajay Seth, India’s economic affairs secretary, told Reuters in an interview: “Their suggestion is not practical. Their team had come and met us … the solution they are offering doesn’t work for a developing economy like India.”

The European Commission delegation informed India that the main goal of the carbon tax was not to generate revenue but to promote greener goods in the EU market. 

They suggested that India could introduce its own carbon tax to support improvements in supply chains and reduce emissions while still retaining its market share in the EU.

In 2023, the EU was India’s second-largest export destination, with nearly $100 billion worth of exports.

“As India is negotiating an FTA with the EU, it should be ready for the scenario that Indian products will attract a high 20%-35% CBAM tax in the EU, and their products will enter India duty-free,” said Ajay Srivastava, founder of Global Trade Research Initiative (GTRI), a New Delhi-based think tank.

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As reported by the think tank Ember, in 2022, India had a carbon intensity of 632 grams per kWh. Since 2018, India has cut its carbon intensity by 3.5% and is working to expand its renewable energy capacity. The country aims to reach net zero emissions by 2070.

“We now have about 170 or 180 gigawatts of renewable energy, but that is not available at night,” Seth said, noting the challenges of producing greener exports solely for the EU market.