India is currently focused on creating a set of guidelines to accurately measure the carbon content present in various products. This effort is aimed at countering the Carbon Border Adjustment Mechanism (CBAM), also known as the carbon tax, which has been viewed as a protectionist move by the European Union.

There is concern that this carbon tax could have a significant impact on Indian exports, particularly in the steel and aluminium sectors, potentially affecting around $8 billion worth of goods. As the Indian and EU trade negotiators prepare for their upcoming Free Trade Agreement (FTA) discussions, the carbon tax is expected to be a key topic of conversation.

The Indian government worries that the carbon levy could lead to an additional tax of 20-35 percent on certain Indian goods. To mitigate this potential impact, the Bureau of Energy Efficiency (BEE) under the power ministry is actively developing standards that will help address the carbon tax issue, specifically focusing on steel and aluminium products.

These standards are not only important for mitigating the effects of carbon taxes, but they also serve a defensive purpose. The CBAM includes provisions that allow for the extension of the tax even to products with low levels of embedded emissions, aiming to prevent exporters from exploiting any loopholes. Therefore, having robust standards in place is crucial for India’s position in dealing with the carbon tax and its potential implications.