India eyes retaliation against EU, UK carbon border taxes

LONDON — India will retaliate against EU and U.K. plans to impose carbon border taxes, its commerce minister warned. 

“Any country which implements such taxes, which are nontariff barriers to trade — India will respond with full measure,” Piyush Goyal told POLITICO on Wednesday. 

“It would retaliate with its own taxes and retaliate on the products of interest to the corresponding countries,” he added, in remarks that went further than earlier criticisms of the tax from New Delhi. 

Along with China and Brazil, India has taken exception to the EU’s Carbon Border Adjustment Mechanism, which seeks to ensure that imports of carbon-intensive goods such as steel and aluminum reflect the cost to European producers of complying with the bloc’s tighter green rules. They view the measure as protectionist.

The threat comes after POLITICO earlier reported that Goyal had privately warned Brussels and London it would retaliate against their carbon taxes, seeking carve-outs for India’s steel, fertilizer and cement industries from the levy. 

“The carbon border adjustment mechanism that the EU has visualized does not meet the test of fair play,” Goyal said in an interview, stressing that developed countries responsible for the bulk of historical emissions should do more to tackle climate change than developing nations.

The European Union and India want to wrap up talks on a free trade agreement this year, with Goyal and his EU counterpart Maroš Šefčovič recently ramping up the pace of negotiations in pursuit of that objective. 

The EU’s carbon border tax poses the biggest hurdle in the talks. 

On Wednesday, the EU agreed to simplify the levy and exempt most importers from the new rules, as part of a wider push to cut red tape.

London and New Delhi struck a trade deal early last month. Goyal emphasized that the U.K.’s carbon border tax, due to be introduced in 2027, would mirror the EU’s.

Any trade deal, he said, needs to be “win-win” to get over the line.

Responding, a European Commission spokesperson said the CBAM was neither a trade tool, nor a protectionist instrument: “This is a climate measure designed in compliance with WTO rules and based on the actual emissions embedded in goods,” the spokesperson said.

They added that the carbon tax was not designed to generate revenues, but to accelerate the uptake of carbon pricing instruments and foster the green transition in third countries.

This story has been updated with comment from the European Commission.