Europe’s Carbon Border Adjustment Mechanism (CBAM) has the right intent but the developed world must lend a helping hand to ensure that the world implements the climate-friendly carbon tax appropriately, says the Managing Director of Jindal Steel, Bimlendra Jha.
“As far as the intent of CBAM is concerned, I think it is right as it is a progressive step in making sure the industry invests in decarbonisation… However, for a very long time, the developed world has developed in a carbon-intensive manner. It should develop in a manner that is not carbon-intensive, and so help must come from the developed world,” Jha told Moneycontrol in an exclusive interview on September 27.
The European Union (EU) has announced that its CBAM, described as a “landmark tool” to put a “fair price on the carbon emitted during the production of carbon-intensive goods entering the EU, and to encourage cleaner industrial production in non-EU countries”, is set to be introduced in its transitional phase from October 1 this year.
This will levy a carbon tax on imports of products made from the processes which are not environmentally sustainable or non-green and will translate into a 20-35 percent tax on select imports into the EU, starting January 1, 2026.
The CBAM framework will impact India's 15-40 percent of steel exports to Europe, Investment Information and Credit Rating Agency (ICRA) said in a report published this June. The impact will be seen from the calendar year 2026 to 2034, it added.
Edited excerpts:
CBAM is about to come into effect from October 1. There have been reports that the Indian steel industry would be impacted widely. As a representative of the industry, how do you see this?
As far as the intent of the CBAM is concerned, I think it is right. If you look at Europe, it has taken progressive steps in making sure the industry invests in decarbonisation. Unfortunately, what has happened as a result is that they have exported employment and imported carbon, because it has gone to countries such as China, where there is a lot more carbon dioxide emission that has taken place.
So, now that the world has woken up to the reality that we need to deal with this global problem and it cannot be dealt with on a local basis, it is important that every country in the world takes the appropriate steps. However, what has happened is that for a very, very long time, the developed world has developed in a carbon-intensive manner.
The developing world needs to develop in a manner that is not carbon- intensive, and the developed world has to give the helping hand. As long as that part of the bargain happens, there is nothing wrong in CBAM or any other decarbonisation measure that the world takes.
Consciousness about carbon is coming in a big way across the world. And India is yet to be built almost 75-80 percent. And if we are to still build this country, we are better off doing it the right way. But our carbon footprint per capita is still very low. And the developed world has its responsibility to pass on the technology and give the helping hand to us in decarbonizing ourselves and building our future in a less carbon footprint way.
Where do you think India stands when it comes to becoming green?
I think the enabling infrastructure, the taxonomy for green steel, all this is yet to be developed. There is also a bit of resource nationalisation that is happening, particularly in Europe, where they want to hoard all the scrap because that is a lower carbon footprint way of producing steel.
Now, you cannot fault people for trying to do things which are in their national interest. But let's not forget that India has many strategic advantages, including the demographic dividend, huge domestic demand, cheaper labour and the possibility of being a supplier to the world. Given all these kinds of things, I think India has a far greater possibility to leverage the opportunity rather than being driven down by it.
There are already a lot of things that are happening in India right now, particularly on decarbonising our energy generation, lowering our carbon footprint in the process, and making it more economically viable by making renewable energy available round the clock. So, I think we are on the right track. Things which will affect us in the short term, if at all they do, it will still be good in the long term for our economy as well as for the world economy.
The government is trying to negotiate, in the sense, they've asked for some exemptions for MSMEs of the country, steel production MSMEs. What do you say about that? You think it's a justifiable ask?
Definitely. As I said, if you try to do things in a very short period of time, there will be imbalances in the supply chain across the world. And the world will suffer as a result of that. So you can't do things suddenly. But if you do it in an enabling manner, if you do it systematically, it is a good thing to happen.
We are talking about sustainability. What steps are Jindal Steel taking to become sustainable and move towards the net zero goal?
Of course, yes. We are the only producers of CGP (coal gasification process) -based DRI (direct reduced iron), which is the cleanest way of using local coal.
We are working with IIT Bombay with a patented process to recycle CO2 into carbon monoxide, which then gets used as a fuel. So, it's a circular economy that we are working on. And practically we are building the last blast furnace for JSPL. After this, we are going in a very different direction.
We have already stated that we will be using 100 percent renewable energy by 2035, but we are trying to accelerate that pace. However, that is something which is directionally correct. Net zero is the term that we have used. But net zero, who knows when it can happen? But we are putting the right steps in that direction, so that we can have renewable energy round-the-clock.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
