Carbon tax proposed by Europe unilateral, will hurt exports: Finance Minister

Finance Minister Nirmala Sitharaman said on Wednesday unilateral and arbitrary measures like the Carbon Border Adjustment Mechanism (CBAM) would hurt Indian industry and pose a challenge for India.

“I am not sure whether it is WTO compliant, but as a country which has proven its record, and for international agencies to have recognised that it is keeping its commitment to climate action goals and fulfilling it, to have to face unilateral measures like this will be a challenge, which I can’t foresee, as it can be one or many. They are unilateral and not helpful for India,” she said, while speaking to a foreign media house in New Delhi.

“These are such not so helpful ways in which developed countries follow certain policies which are unilateral and, I’m sorry to say, arbitrary,” she added.

The EU’s Carbon Border Adjustment Mechanism (CBAM) is the EU’s tool to put a fair price on the carbon emitted during the production of carbon intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries. The carbon tax will come into effect from January 1, 2026.

“You’re putting a tariff for what you define as dirty steel, while you yourself would produce the dirty steel and make sure that the money which you earn from this is funding your conversion from dirty to green steel,” she added.