EU-India Strengthen Collaboration on CBAM

The European Union has commenced fresh negotiations with India following its decision to implement the Carbon Border Adjustment Mechanism (CBAM) on imported steel and aluminum, aiming to resolve ongoing trade tensions.

European Commission Secretary-General Gerassimos Thomas led a delegation to New Delhi in early July to discuss a range of taxation and customs issues, including CBAM. The visit sought to harmonize decarbonization efforts between Indian and European industries and address the challenges Indian companies face under CBAM.

Thomas engaged with Indian government officials and steel industry stakeholders, emphasizing Europe’s commitment to importing low-carbon products to support global decarbonization and ensure equitable treatment of imported goods. This mechanism is set for gradual introduction, providing maximum predictability for investors and businesses.

Thomas lauded India's economic decarbonization plans, highlighting the shared commitment of the EU and India to tackle environmental issues collaboratively. The EC delegation's visit provided a platform to discuss the implementation challenges of CBAM for Indian companies, particularly focusing on the potential impact on SMEs.

Technical meetings with India's Ministry of Energy will continue, with a CBAM transition assessment report due to be submitted to the European Council and Parliament by the end of next year. This report will be publicly available for Indian industries and authorities to comment on and engage in further discussions.

Both parties also expressed mutual interest in cooperating on carbon trading markets, pricing mechanisms, energy efficiency, renewable energy, and clean technology. The EU plans to consult with major Asian trading partners, including South Korea and Japan, on CBAM, with both countries committed to addressing related uncertainties.

Last month, trade negotiations in New Delhi aimed at mitigating the impact of expanded safeguards and tariffs on certain steel imports failed to reach an agreement. India had sought equivalent concessions and trade compensation from the EU but to no avail.

With impending EU import restrictions on Indian steel products, speculation arose that India might retaliate through WTO litigation and trade reprisals. However, the recent EC delegation visit, which initiated discussions on various steel-related trade issues, suggests a potential easing of trade conflicts and the start of new negotiations.