Roadmap for Answer Writing

1. Introduction

• What is CBAM?
  • Introduce CBAM as a policy designed by the European Union to address carbon leakage by imposing a carbon price on imports of certain high-carbon products.
  • Mention the implementation timeline (2026) and the targeted products such as steel, cement, and fertilizers.

Fact to Use:

• CBAM Overview: “The European Union’s Carbon Border Adjustment Mechanism (CBAM) is scheduled to start in 2026, targeting high-carbon products like steel, cement, aluminum, and fertilizers”.

2. Impact of CBAM on India

A. Trade Flow Disruptions

• Discuss the impact on India’s key exports like steel, cement, and fertilizers. With over 50% of India’s exports to the EU being carbon-intensive, these could face higher costs due to CBAM’s carbon price.

Fact to Use:

• Export Impact: “Over 50% of Indian exports to the EU could be impacted by CBAM, particularly carbon-intensive goods like steel and cement”.

B. Strained Trade Relations

• Explain that the implementation of CBAM may strain relations between India and the EU. India might argue that CBAM unfairly targets developing countries and could raise disputes at global forums like the World Trade Organization (WTO).

Fact to Use:

• Trade Relations: “The unilateral implementation of CBAM could lead to trade disputes between India and the EU, potentially at the WTO”.

C. Increased Compliance Costs

• Highlight the additional costs for Indian exporters, particularly Small and Medium Enterprises (SMEs), due to the need for monitoring, reporting, and verifying carbon emissions, which could make Indian goods less competitive in the EU market.

Fact to Use:

• Compliance Costs: “The burden of monitoring, reporting, and verifying emissions could increase compliance costs for Indian exporters, especially for SMEs”.

3. Steps India Can Take to Minimize the Effects (120-150 words)

A. Mobilizing International Support

• India can build coalitions with other developing nations to push for a more balanced approach at the WTO or United Nations Framework Convention on Climate Change (UNFCCC) to challenge the unilateral nature of CBAM.

Fact to Use:

• International Support: “India, along with other developing countries, can pressure the EU at international platforms like the WTO to address the concerns of unilateral climate policies”.

B. Policy and Regulatory Alignment

• India can align its domestic policies with CBAM’s requirements by promoting carbon efficiency and clean production technologies. For example, incorporating decarbonization measures into the National Steel Policy (2017).

Fact to Use:

• Policy Alignment: “Aligning India’s National Steel Policy, 2017 with decarbonization goals will help meet CBAM’s requirements”.

C. Promotion of Carbon Trading Mechanisms

• India can implement a carbon trading system similar to the EU’s Emissions Trading System (ETS), which would help reduce the carbon intensity of India’s exports, thus mitigating CBAM penalties.

Fact to Use:

• Carbon Trading Systems: “India can develop a carbon trading system similar to the EU’s Emissions Trading System (ETS) to reduce the carbon intensity of its exports”.

D. Negotiating Technology Transfer and Financing

• India can negotiate with the EU for technology transfer and access to green financing to improve carbon efficiency in Indian industries.

Fact to Use:

• Technology Transfer: “India could seek negotiations with the EU to facilitate technology transfer and financing mechanisms to improve carbon efficiency”.

4. Conclusion (40-50 words)

• Summarize the potential impacts of CBAM on India, emphasizing the importance of policy adjustments, international cooperation, and investment in cleaner technologies to minimize these effects. Highlight India’s proactive role in navigating the challenges of CBAM while maintaining its economic and developmental goals.

Example Answer Structure:

1. Introduction 
   • Define CBAM and briefly explain its goal and the targeted industries.
2. Impact on India 
   • Discuss trade disruptions, strained relations with the EU, and compliance costs on Indian exporters.
3. Steps India Can Take 
   • Highlight international cooperation, policy alignment, carbon trading, and technology transfer as mitigation strategies.
4. Conclusion
   • Summarize India’s proactive steps in adapting to CBAM.