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Potential implications of the EU's Carbon Border Adjustment Mechanism

Author

Listed:
  • Gupta, Anandita

    (National Institute of Public Finance and Policy)

  • Pandey, Radhika

    (National Institute of Public Finance and Policy)

  • Sapatnekar, Sanhita

    (Department of Economics, University of Navarra, Spain)

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.

Suggested Citation

  • Gupta, Anandita & Pandey, Radhika & Sapatnekar, Sanhita, 2024. "Potential implications of the EU's Carbon Border Adjustment Mechanism," Working Papers 24/408, National Institute of Public Finance and Policy.
    • Handle: RePEc:npf:wpaper:24/408
    Note: Working Paper 408, 2024
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