The EU’s Carbon Border Adjustment Mechanism (CBAM) enters full reporting from 2026 and tariffs from January 2026 on six carbon-intensive sectors. Examine its implications for India’s exports and climate diplomacy.
Subtopic: IR · Effect of policies of developed/developing countries on India
How to structure your answer
Introduction: The EU's Carbon Border Adjustment Mechanism (CBAM), legislated under Regulation (EU) 2023/956, enters definitive phase from 1 January 2026, imposing a carbon levy on six sectors — iron and steel, aluminium, cement, fertilisers, electricity, hydrogen.
Body: Three dimensions — (i) Trade exposure: India exported about $8.2 billion of CBAM-covered goods to EU in 2023-24, with iron-and-steel and aluminium most exposed; (ii) Equity argument: CBAM violates CBDR-RC principle of UNFCCC and Article 4 of the Paris Agreement; India and BASIC group oppose it as 'green protectionism'; (iii) Domestic response: India proposes its own Carbon Credit Trading Scheme (CCTS, 2023), Perform Achieve Trade (PAT) cycle credits, and a domestic carbon price to retain revenue.
Way forward / Conclusion: Bilateral CBAM-equivalence under the India-EU FTA (concluded 27 January 2026), accelerate hydrogen-based steel via National Green Hydrogen Mission, and contest CBAM at WTO under GATT Article XX(b)(g).
Written within the word limit
141 words · target 150 words · 9 min
Introduction: The EU's Carbon Border Adjustment Mechanism (CBAM), under Regulation (EU) 2023/956, enters its definitive phase from 1 January 2026 on six sectors — iron and steel, aluminium, cement, fertilisers, electricity and hydrogen.
Body: Three dimensions trace the implication. First, trade exposure — India exported about $8.2 billion of CBAM-covered goods to the EU in 2023-24, with iron-and-steel and aluminium most exposed; effective tariff equivalents reach 20-35 percent on carbon-intensive shipments. Second, equity — CBAM violates CBDR-RC of the UNFCCC and Article 4 of the Paris Agreement; India and BASIC frame it as 'green protectionism'. Third, domestic response — the Carbon Credit Trading Scheme (CCTS, 2023), PAT-cycle credits and a domestic carbon price under the Energy Conservation (Amendment) Act 2022 retain revenue inside India.
Conclusion: Negotiate CBAM-equivalence under the India-EU FTA (27 January 2026), accelerate green-hydrogen steel via the National Green Hydrogen Mission and contest CBAM at WTO under GATT Article XX(b)(g).
What an examiner expects to see
- EU CBAM — Regulation (EU) 2023/956; transition Oct 2023-Dec 2025; full phase Jan 2026
- Six sectors covered — iron and steel, aluminium, cement, fertilisers, electricity, hydrogen
- India's CBAM-exposed exports about $8.2 billion (2023-24)
- India-EU FTA negotiations concluded 27 January 2026
- CCTS — Carbon Credit Trading Scheme, India (notified June 2023)
- Common But Differentiated Responsibilities (CBDR-RC) under UNFCCC and Paris Agreement
- BASIC group (Brazil, South Africa, India, China) opposes CBAM
- Potential WTO challenge under GATT Article XX(b)(g) and Article III
Concrete cases, schemes and judgments
- EU Carbon Border Adjustment Mechanism (CBAM)
- India-EU FTA concluded 27 January 2026
- Carbon Credit Trading Scheme (CCTS, 2023)
- National Green Hydrogen Mission (Rs 19,744 crore, 2023)
- Perform Achieve Trade (PAT) cycle