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As India threatens to retaliate, European Commission says stopping carbon leakage is sole objective of CBAM

Dubai, Dec 8 (PTI) The European Commission on Friday said the sole purpose of CBAM – a tax the EU plans to impose on energy-intensive goods from countries like India and China – is to stop carbon leakage. Where companies decide to shift their production out of a country with strict policies.

European Commissioner Wopke Hoekstra made the statement at a press conference at the UN climate talks here, while India’s Commerce and Industry Minister Piyush Goyal threatened retaliation at an event in New Delhi.

“The sole purpose of the CBAM is to prevent carbon leakage,” Hoekstra said. Peter Liese, a German politician and member of the European Parliament, said the bloc aims to reduce emissions by 55 percent by 2030 and that it would not be possible to achieve such a significant reduction without CBAM.

Stressing that the CBAM is vital to financing the bloc’s climate goals, he cautioned that any attempt to dismantle it would have far-reaching consequences beyond its scope. “Any agenda to destroy the CBAM will destroy much more than that.” After highlighting the issue at the G20 summit in Delhi, the group of BASIC countries (Brazil, South Africa, India and China) have raised concerns at COP28 in Dubai, saying it will harm livelihoods and economic growth.

The Carbon Border Adjustment Mechanism (CBAM) aims to set a fair price on carbon emitted during the production of energy-intensive products such as iron, steel, cement, fertilizers and aluminum entering the EU. It also encourages clean industrial production in non-EU countries. Companies that meet EU carbon emission standards are exempted from this.

The carbon tax will come into effect from January 1, 2026. During the trial period starting on October 1, 2023, companies in seven carbon-intensive sectors, including steel, cement, fertilizer, aluminum and hydrocarbon products, will have to share emissions data with the EU.

A recent study by the United Nations Conference on Trade and Development (2021) shows that through the CBAM, a US$44 per tonne carbon tax would reduce leakage by more than half, from 13.3 per cent to 5.2 per cent.

Indian exporters of steel and aluminum could face losses of up to US$2 billion due to border taxation in European countries, according to a study conducted by the Center for Social and Economic Progress (CSEP), a New Delhi-based public policy think tank. Keeping in mind, India was the eighth largest exporter of iron and steel to the EU in 2019.

Some believe that while a carbon tax may motivate producers to reduce emissions, it also shifts the focus of resource-poor countries from adapting to climate impacts to cutting emissions. PTI GVS TIR TIR

(This story is published as part of an auto-generated syndicated wire feed. No edits to the headline or body have been made by ABP Live.)

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