Carbon Border Adjustment Mechanism

Carbon Border Adjustment Mechanism

Carbon Border Tax

Details on the topic “Carbon Border Tax

Relevance for Prelims: Term in News, Carbon Border

Relevance for Mains: Need for Carbon Tax, Implication of CBT

Context: The European Union in COP-27 has proposed a Carbon Border Adjustment Mechanism- to charge duty on the products such as cement, steel, fertilizers, and aluminum.

About Carbon Border Tax:

  • The purpose of the Carbon Border Tax is to disincentive companies outside the European Union that are exporting to the European Union four carbon extensive goods: Steel, fertilizers, cement, and aluminum.
  • The proposal also requires importers to buy digital certificates representing the tonnage of carbon dioxide emissions embedded in their imported goods.

Carbon Border Tax

 Pic: Carbon Border Tax

Need of Imposition of Carbon Tax:

    • Climate Change Mitigation: European Union has declared to cut its carbon emissions by at least 55% by 2030 compared to 1990 levels. Emissions from imports contribute 20% of the EU’s CO2 total emissions.
    • Carbon Leakage: Businesses when finding more suitable business alternatives shift their operations which results in carbon leakage and increases the total emissions in the world without paying for the damage.

Issues associated with Carbon Tax:

    • Most Affected Countries: The BASIC Group (Brazil, South Africa, India, and China) has opposed the EU’s proposal terming it discriminatory and against the principles of equity and Common but differentiated responsibilities and respective capabilities.
    • India’s exports: Exports from India will come down as EU is India’s third-largest trading partner. The imposition of tax will increase the prices of India-made goods making them less attractive for importers.
    • Violation of the Rio Declaration: Article 12 of the Rio Declaration says that standards applicable to developed countries are not applicable to developing countries. The EU’s proposal seems uniform for all the countries.
    • Non-Tariff Barrier: The policy can be regarded as a disguised form of protectionism.

The carbon Border Adjustment Mechanism may spur the adoption of cleaner technologies but without adequate assistance for newer technologies could rather become disadvantageous for developing countries.

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The Hindu

Plutus IAS current affairs 17th November 2022

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