The European Union (EU) has pledged to engage in bilateral negotiations with New Delhi to address its apprehensions regarding proposed tariffs on high-carbon goods such as steel and iron ore imported from India, as shared by the EU’s climate policy chief on Friday.
The EU’s Pioneering Plan on High-Carbon Goods
Last month, the 27-member EU introduced the first-of-its-kind plan to levy tariffs on imports of high-carbon goods from 2026. This groundbreaking move, which spans products such as aluminium, cement, power, fertilisers, and hydrogen, forms part of the bloc’s ambitious goal to attain net-zero greenhouse emissions by 2050. Indian industry insiders estimate that exports worth nearly $8 billion, including significant goods like steel and iron ore, will initially face these tariffs. However, by 2034, all goods shipped to the EU are expected to come under this purview.
Bilateral Discussions to Resolve Potential Trade Impact
Frans Timmermans, the EU official spearheading climate policy, expressed confidence in the resolution of this issue through bilateral discussions, deeming it premature to fret over the repercussions of these tariffs on Indian exports. “If CBAM (Carbon Border Adjustment Mechanism) has undesired outcomes, we can correct it,” Timmermans reassured during his two-day visit to India, following meetings with industry leaders and government officials.
The EU’s CBAM is the tool through which it plans to implement these high tariffs, which could range between 20% and 35%. In response to the EU’s move, India had cautioned that it might lodge a complaint with the World Trade Organization (WTO), while simultaneously attempting to settle the issue through negotiations.
Timmermans noted that both parties would assess the new mechanism’s impact during an evaluation period for exporters commencing in December. “It is absolutely not our intention to create a situation that could be perceived as protectionist,” he clarified, thus dismissing any potential violations of WTO rules.
During the discussion, industry leaders probed the EU climate chief about potential relaxations for small exporters and the prospect of “technology transfer” to achieve climate goals.