Environment & Biodiversity

What is the Carbon Border Adjustment Mechanism?

The Indian government will examine how the planned carbon border adjustment mechanism (CBAM) of the European Union (EU) may effect Indian business. The CBAM is scheduled to begin in October of this year.

Carbon Border Adjustment Mechanism (CBAM)

Proposed byEuropean Union (EU)
PurposeTo reduce carbon emissions from imported goods and prevent competitive disadvantage against countries with weaker environmental regulations
ObjectivesReduce carbon emissions from imported goods Promote a level playing field between the EU and its trading partners Protect EU companies that have invested in green technologies

CBAM Advantages

  • Encourages non-EU countries to adopt stricter environmental legislation in order to reduce global carbon emissions.
  • Reduces carbon emissions by deterring businesses from relocating to nations with laxer environmental standards.
  • Revenue is generated, which might be used to fund EU climate initiatives.

Problems with CBAM

  • Difficulty correctly estimating carbon emissions from imported commodities, particularly in nations lacking adequate carbon accounting systems.
  • Potential for trade conflicts with the EU’s trading partners, particularly if other countries retaliate.

@the end

  • The CBAM is a proposed EU strategy to cut carbon emissions from imported goods while also promoting a fair playing field between the EU and its trading partners.
  • Despite its shortcomings, the CBAM has the potential to encourage non-EU countries to implement stricter environmental legislation and cut global carbon emissions. 
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