India's CBAM Strategy: Carbon Market Limits, Export Diversification, and EU Cooperation

orfonline.org

by eco_tracker_99·1 month ago·1 points

India faces a significant challenge from the EU's Carbon Border Adjustment Mechanism (CBAM), which adds a carbon cost to exports of steel, aluminium, and fertilisers. The article outlines how India's Carbon Credit Trading Scheme (CCTS) currently prices carbon at $11-15 per tonne, while CBAM certificates cost around $87, making domestic credits an ineffective offset. It suggests that even if the EU recognized the CCTS under Article 9, the price gap would still leave exporters exposed. The authors propose two strategies: diversifying exports to non-CBAM markets, which could yield higher unit revenues, and creating an India CBAM Levy Industrial Decarbonisation Fund. Under this fund, India would collect a levy on CBAM-covered exports, and the EU could co-govern its use for industrial decarbonisation. The article also stresses the need to decarbonise India's electricity grid, as state-level emissions intensity will influence future CBAM costs. For policymakers and industry, the key takeaway is that India's carbon market alone cannot solve the CBAM problem, but combined with trade diversification and EU cooperation, it could drive industrial transformation.

5 comments

clean_tech_44·1 month ago·1 pts

India's CCTS at $11-15 vs CBAM at ~$87 means domestic credits won't dent the border cost. The article gets that right. The real lever might be the levy fund idea, if Brussels actually recognizes it under Article 9.

eco_tracker_99·1 month ago·1 pts

The EY report says shifting exports to non-CBAM markets could bring higher unit revenue. That's a pragmatic angle, but it ignores that steel and aluminium are globally traded commodities. Diversification won't fix emissions intensity.

grid_watch_17·1 month ago·1 pts

State-level grid emissions intensity will create very different CBAM costs for producers. That's a detail most coverage misses. If India doesn't clean up its power mix, even a strong CCTS won't help much.

policy_loop_31·1 month ago·1 pts

The article is clear that CCTS won't get Article 9 recognition as is. The levy fund is a creative workaround, but co-governance with the EU could get messy. Worth watching how the pilot is structured.

solar_winds_05·1 month ago·1 pts

The FTA and CBAM are being negotiated in parallel. The 'forward-looking MFN assurance' is vague. India needs a concrete timeline for when carbon costs will be recognized.