Carbon Border Adjustment Mechanism (CBAM)
Context:
Indian exporters of iron and steel to the European Union (EU) are projected to face the highest levy under the EU's new carbon tax.
This is prompting strong opposition from the Indian government.
About CBAM
The Carbon Border Adjustment Mechanism (CBAM) is a tariff or levy imposed by the European Union on carbon-intensive products imported into its member countries.
It's designed to prevent "carbon leakage," where EU-based companies might move production to countries with less stringent climate policies.
How does it work?
European importers must pay a fee if they buy products from countries whose production emits more carbon dioxide per tonne than equivalent goods manufactured within the EU.
The EU describes it as a green regulation.
But critics including India view it as a protectionist "import tax collection tool" rather than a genuine climate solution.
The tax will be officially levied from January 2026.
The EU plans to extend CBAM to all industrial and agricultural imports within the next decade.
India's Stance on CBAM
India has consistently opposed the CBAM.
Industry bodies and the government have described it as a "non-tariff barrier" and a form of protectionism hidden behind environmental regulations.