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Indian industries concern over EU Carbon tax data demands
Industry News- Sep 08,23
This issue was raised during a meeting convened by the Ministry of Commerce on September 6, where government representatives discussed the challenges associated with the European Union's implementation of a carbon tax.
Indian industries, particularly those in sectors such as steel, have expressed significant concerns about the onerous data reporting requirements necessary to comply with the European Union's carbon tax decision. They have urged the Indian government to address this issue with the EU, according to an official statement.
This issue was raised during a meeting convened by the Ministry of Commerce on September 6, where government representatives and industry leaders discussed the challenges associated with the European Union's implementation of a carbon tax or carbon border adjustment mechanism (CBAM).
The industry argues that the data-sharing process imposed by the EU is excessively burdensome, as it demands a substantial amount of information. Furthermore, the industry is concerned about the EU's request for commercially sensitive data. There is a strong desire for a reduction in these reporting requirements, and discussions are ongoing to find solutions to these concerns, as the official explained.
According to Ajay Srivastava, co-founder of the think tank GTRI, CBAM places extensive data compliance obligations on Indian exporters. Exporters must provide detailed data, explanations, and methodologies for every shipment to their EU counterparts. Failure to comply or providing incorrect information may result in severe penalties. Given the current limitations in India's domestic data collection infrastructure, Indian companies must establish robust systems before they can effectively report data.
Additionally, the official mentioned that the Ministry of Power is actively working on the Carbon Credit Trading Scheme (CCTS), and India is advocating for a mutual recognition agreement with the EU regarding CCTS certificates, which would benefit domestic players.
The meeting on September 6 was attended by senior officials from various government departments, including the Department for Promotion of Industry and Internal Trade, ministries of Finance, Power, Steel, and Mines, as well as representatives from the steel and engineering sectors. This meeting followed a similar one held in May, during which the industry was advised to prepare for the impending carbon border adjustment mechanism (CBAM).
It is expected that this tax will negatively impact India's exports of metal products such as iron, steel, and aluminium to the EU. According to the Global Trade Research Initiative (GTRI), the tax will have adverse consequences for India's exports in these sectors. In 2022, 27 per cent of India's iron, steel, and aluminium product exports, valued at USD 8.2 billion, were destined for the EU.
The compliance process for this tax consists of two parts: the requirement to submit data from October onwards, followed by the actual imposition of the tax. The CBAM, or carbon tax, will come into effect on January 1, 2026. However, starting from October 1 of the current year, domestic companies in seven carbon-intensive sectors, including steel, cement, fertilisers, aluminium, and hydrocarbon products, must begin sharing data on carbon emissions with the EU. Penalties will be imposed for non-compliance, negligent reporting, or misreporting of data from October 1 onwards.
On a multilateral level, India and several other countries have raised concerns about CBAM with the World Trade Organisation (WTO). India submitted a paper on this subject to the WTO in February. While the European Union claims that CBAM is part of its climate action efforts, industries in countries like India perceive it as a trade-related measure.
To mitigate the impact of CBAM, domestic companies in various sectors, including steel, are taking measures such as establishing captive solar power plants and adopting climate-friendly manufacturing processes to reduce carbon emissions. The Indian government is also implementing initiatives like afforestation and promoting the use of renewable energy to address these challenges.
Source: Business Standard
World Trade Organisation
Global Trade Research Initiative
Carbon Credit Trading Scheme
Think Tank GTRI
Ajay Srivastava
Ministry of Commerce
European Union
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