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Green Crosshair – European Union’s Carbon Tax Plans –

  • A multi pronged counter is warranted to tackle the EU’s carbon tax plans.

What’s in the news ?

  • The European Union (EU) proposes to introduce a framework for levying a carbon tax on imports of the products.
  • The products that rely on non-green or sub-optimally sustainable processes and where carbon emissions are deemed to have not been adequately priced.
  • This procedure will be called Carbon Border Adjustment Mechanism (CBAM).
  • The EU argues that this CBAM will ensure its climate objectives are not undermined by carbon-intensive imports and spur cleaner production in the rest of the world. 

Impact on Indian exports 

  • A significant threat to some of India’s biggest exports to the trading bloc, including iron ore and steel.
  • It levies carbon taxes estimated to range from 19.8% to 52.7%.
  • Engineering products, the largest export growth driver in recent years, would be impacted too.
  • The EU argues that the new carbon tax norms are compatible with WTO norms, but India is looking to challenge it.

What exactly is a Carbon tax ?

  • A carbon tax is a tax levied on the carbon emissions required to produce goods and services.
  • Carbon taxes are intended to make visible the “hidden” social cost of carbon emissions which are otherwise felt only in indirect ways like more severe weather events.
  • It is designed to reduce carbon dioxide emissions by increasing prices of the fossil fuels that emit them when burned.
  • It works as a sort of ‘Pollution Tax’.
  • A carbon tax would also increase the costs of gasoline and electricity, therefore giving consumers a reason to shift to clean energy sources.
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