Rethinking Carbon Pricing and Taxes

• India’s free trade agreement with the U.K. is a significant step towards reducing carbon pricing, but it does not address the potential impact of the U.K.’s Carbon Border Adjustment Mechanism (UK-CBAM).

• The UK-CBAM, similar to the EU’s CBAM, will be implemented from January 2027, covering emissions from hard-to-abate sectors like steel and aluminum.

• India plans to retaliate against any harmful impacts of CBAM, but the cost impact may not be alleviated by any future action.

• The U.K.’s CBAM permits deductions for carbon pricing in exporting countries, but the scope of deductions is unclear.

• The U.K.’s approach is focused on levying a charge on exports into the U.K. to match the embedded carbon price paid by domestic producers.

• Fragmented markets will raise compliance costs, disrupt supply chains, and hinder growth and climate goals.

• A global carbon pricing agreement is essential to align methods for measuring emissions, streamline reporting requirements, and support for green tech transfer.

• The Indian government should assess the effectiveness of this model and explore synergies with like-minded developing countries.

• National action is needed to view clean technologies as tools for efficiency and competitiveness, and the government should streamline various implicit carbon taxes into a unified carbon market framework.

• The draft climate finance taxonomy developed by the Ministry of Finance can enable investors to boost clean tech investment.

carbon emissions taxation is important topic for Civil service exam (WBCS).

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