Country Report

Carbon Tax Hurdle Looms From India-UK FTA Talks

Published: April 5, 2023

Yet, neither of the two administrations has set a timeline for wrapping up talks.

The EU carbon tax, also known as CBAM, levies a fee on imported goods depending on their carbon footprint in an effort to reduce carbon emissions.

Even if India and the UK agree to major tariff concessions, an EU-style carbon border adjustment mechanism (CBAM) is predicted to hurt India’s metal exports to the UK, according to experts. Six rounds of negotiations between India and the UK have been finished, and the deal is about to be signed.

The UK will gradually tax all imports at rates that are significantly higher than the Kingdom’s present import tariff rates as a result of CBAM. The average tariff rate in the UK is below 2%. They could disappear after the India-UK FTA. Indian exports, however, will still be required to pay a considerably higher rate of carbon price. “India must seek clarification on this matter,” said Ajay Srivastava, the founder of the Global Trade Research Initiative (GTRI) and a former Indian Trade Service officer. “India is in an advanced stage of finalising an FTA with the UK.

Tensions in economic relations between rich and developing nations have been brought on by the carbon price plan. India is considering slapping retaliatory tariffs on exports to the European Union in response to the bloc’s proposed carbon tax, which may disrupt over $8 billion worth of Indian metal shipments to the EU. Numerous nations, including India, have termed the move discriminatory.


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