Western labour and environmental requirements proceed to pose challenges for Indian commerce negotiators, with the UK’s carbon tax — it’s anticipated to disrupt India’s exports of iron, metal, aluminium, ceramics and cement — rising as a key sticking level in talks aimed to finalise a commerce deal through the newest spherical of negotiations in London, The Indian Categorical has learnt.
Because the UK stays unwilling to grant any concession beneath its Carbon Border Adjustment Mechanism (CBAM), which seeks to impose duties on carbon-intensive imports, India has proposed a “rebalancing mechanism” which might require the UK to compensate Indian business for losses incurred because of the regulation.
“The ‘rebalancing mechanism’ article has been inserted into the ‘basic exceptions’ chapter of the negotiating textual content between the 2 international locations. This is able to allow India to assert compensation for its losses and make sure the UK doesn’t elevate a dispute towards India on the World Commerce Organisation (WTO),” a authorities official, talking on the situation of anonymity, informed The Indian Categorical.
The final exceptions chapter in worldwide commerce agreements such because the Common Settlement on Tariffs and Commerce (GATT) permits international locations to implement measures that may “in any other case violate commerce guidelines”, supplied they’re justified on grounds corresponding to public well being or environmental safety, in accordance with the WTO.
Amongst India’s earlier calls for have been concessions for Indian MSMEs and country-specific exemptions. The 2 sides additionally mentioned harmonising carbon emission requirements to permit Indian carbon taxes to stay throughout the nation, however variations in measurement strategies stay unresolved.
The draft UK CBAM laws states that the levy will apply to imported items from January 1, 2027 and defines CBAM items as aluminium, cement, fertilisers, hydrogen, iron and metal — sectors related to excessive carbon emissions.
Defined
The sticking level
The draft additionally outlines how emissions might be calculated and the way the CBAM fee might be set, primarily based on a home sectoral worth linked to the UK Emissions Buying and selling Scheme.
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India’s Carbon Credit score Buying and selling Scheme (CCTS) is predicated on depth of emission that fits a growing nations mannequin as towards the system in Western international locations that offers with absolute emission.
Ajay Srivastava, former commerce officer and head of the World Commerce Analysis Initiative (GTRI), mentioned: “The UK’s proposed CBAM poses a big concern for Indian exports, because the regulation would end result within the UK progressively imposing greater taxes on imports primarily based on their carbon footprint, doubtlessly far exceeding the UK’s present common tariff fee of beneath 2 per cent.”
“Whereas the FTA may scale back or get rid of tariffs, Indian exports may nonetheless face hefty carbon taxes, not like UK exports to India,” he mentioned.
Srivastava mentioned India have to be vigilant on non-traditional commerce subjects corresponding to labour, atmosphere, gender and mental property rights when coping with developed international locations, as these typically require home coverage adjustments.
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“Even when the UK agrees to get rid of tariffs on sectors like textiles, Indian exporters should still have to fulfill stringent UK sustainability necessities. This might hurt Indian exports, notably in labour-intensive sectors. India should negotiate firmly to make sure that market entry gained by way of tariff elimination isn’t undermined by different boundaries,” he mentioned.
Finance Minister Nirmala Sitharaman and Commerce and Business Minister Piyush Goyal have known as the CBAM, or carbon tax, an “unfair” measure and a violation of the “frequent however differentiated duties” (CBDR) precept of multilateral local weather negotiations.
This precept holds that whereas all international locations should act on local weather change, their duties aren’t equal because of differing ranges of financial improvement.
The carbon tax, first launched by the European Union, has additionally met with robust resistance in India. Notably, the EU’s CBAM is ready to take impact in January 2026, with a transition interval — requiring exporters to report knowledge to EU authorities — already underway since October 1, 2023. That is notably important for India, which sends over 15 per cent of its complete items exports to the EU. In 2022–23, India exported items value $75 billion to the bloc.
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Whereas a number of international locations, together with China, Russia, Brazil and South Africa, have taken the EU to the WTO over CBAM, India is but to file a proper case as either side are actively pursuing a free commerce settlement. Equally, India and the UK proceed to barter, the talks geared toward discovering a standard floor.
A question emailed by The Indian Categorical to the Ministry of Commerce and Business didn’t elicit a response till Monday night.