Potential implications of the EU's Carbon Border Adjustment Mechanism

Anandita Gupta (), Radhika Pandey and Sanhita Sapatnekar
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Anandita Gupta: National Institute of Public Finance and Policy
Sanhita Sapatnekar: Department of Economics, University of Navarra, Spain

Working Papers from National Institute of Public Finance and Policy

Abstract: In May2023,theEuropeanUnion(EU)implementedtheCarbonBorderAd-justment Mechanism(CBAM)topreventcarbonleakagerisksassociatedwithits ambitiousclimatepolicies.ExaminingCBAMinconjunctionwiththeEUEmissions TradingSystem(EUETS),thepaperhighlightspotentialCBAMimplicationsand discusses prooposalstoaddresskeyissues.CBAMislikelytoimpactexporters'prof-itabilityandtradecompetitiveness,favouringnationswithfasterdecarbonisation abilityandrobustcarbonpricingsystems.Thepaperadvocatesfornon-EUcoun- tries tostrengthentheiremissionsmonitoring,reporting,andverification(MRV) systems andcarbonpricingframeworks.ForIndia,changingthenomenclatureof the coalcomponentundertheGSTCompensationCesstoa`carbontax'couldbe considered toreduceindustries'potentialcarbonliabilities.Thedevelopmentof India's nationalemissionstradingsystemcouldconsiderCBAM-relatedimpacts, internationalstandards,andinsightsfromotherjurisdictions,tostrengthenitscar-bonmarketandachieveitsclimatecommitments.Lastly,thepaperhighlightstheneed forataskforceundertheleadershipofthePrimeMinisterforcontinuousen- gagementonevolvingcarbonmarketissuesandthedynamicglobaltradelandscape.

Pages: 36
Date: 2024-03
New Economics Papers: this item is included in nep-eec, nep-ene, nep-env, nep-eur and nep-int
Note: Working Paper 408, 2024
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