India will respond appropriately if UK levies carbon tax, says Piyush Goyal

Commerce Minister Piyush Goyal

India will respond appropriately if London levies Carbon Border Adjustment Tax (CBAM) on Indian exports, Piyush Goyal said on July 26 given that the trade agreement signed between the two nations does not have an explicit provision around such a levy.

"Carbon tax is getting postponed repeatedly, even European Union (EU) hasn't implemented yet, United Kingdom (UK) will contemplate such a levy even after that. When that time comes, India is not weak, India will respond appropriately. Whoever puts a non-tariff barrier on our trade, India will give an appropriate response," Goyal said.

While, the UK has agreed that India can take appropriate counter-balancing measures if it implements CBAM, this understanding isn't part of the Comprehensive Economic and Trade Agreement (CETA) signed on July 24, given that London is yet to implement this levy.

The UK government will implement CBAM by 2027, a policy that puts a price on the carbon emitted by imports.

The liability applied by the CBAM will depend on the greenhouse gas emissions intensity of the imported good and the gap between the carbon price applied in the country of origin (if any) and the carbon price that would have been applied had the good been produced in the UK, according to the British government.

Goyal added that EU's industry is more worried about CBAM than their Indian counterpart since it will increase Europe's cost of exports and manufacturing, among others.

Even in the talks for a trade deal with the EU, CBAM has been one of the key sticking points for India.

EU approved CBAM in 2023 and is expected to be implement it from January 2026, seeking to impose tariffs on imports of high-carbon goods including steel, cement and aluminium, aiming to reach net-zero greenhouse emissions by 2050.

Goyal reiterated that India has the strength to respond to any non-tariff barriers on trade.

CBAM is specifically expected to impact Indian exports of steel and iron products.

This at a time when India has got full tariff elimination from the current rates of 10-percent, for iron and steel products under the trade deal with the UK.