India Seeks Safeguards in EU Free Trade Agreement to Counter Carbon Tax

India is urged to include protective measures in its proposed free trade agreement (FTA) with the European Union to shield itself from the EU's impending carbon tax. The EU's Carbon Border Adjustment Mechanism could impose high carbon charges on Indian exports. Talks are ongoing with political engagements expected.

India is advised to incorporate protective clauses in its forthcoming Free Trade Agreement (FTA) with the European Union to defend against the EU's upcoming carbon tax. This insight comes from the Global Trade Research Initiative (GTRI), which highlights the potential threat of the EU's Carbon Border Adjustment Mechanism (CBAM) set to commence on January 1, 2026.

CBAM could largely affect seven carbon-intensive sectors, including steel, cement, and aluminium. GTRI warns that without protective language in the FTA, Indian exports might face high carbon charges within the EU, while EU goods could enter India duty-free.

With ongoing talks having resumed in 2022, political figures are involved to steer negotiations forward. Bilateral discussions seek to address core trade issues, including goods, services, and investment, aiming to bolster trade and investment between the regions.

(With inputs from agencies.)