India reserves the right to retaliate if the UK proposes carbon tax hits exports: Officials

New Delhi: The India-UK Free Trade Agreement does not stipulate the response to the proposed carbon tax in the UK, but due to uncertainty and lack of British legislation, New Delhi reserves its right to retaliate or rebalance against future measures if future measures affect domestic exports. The UK government decided in December 2023 to implement its Carbon Border Adjustment Mechanism (CBAM) from 2027. According to economic think tank GTRI, the value of India's exports to the UK of $775 million may be affected as the UK decides to the UK starting from 20277, which may be affected.
The official said the Free Trade Agreement with the UK (FTA) has no objection to the CBAM provisions, which has the potential to eliminate concessions provided by the UK to India.
“Due to the uncertainty of the present, there is no legislation, and there is an understanding that India will reserve the right to retaliate (in the future) or rebalance,” the official said.

The EU after the UK will be the second time that CBAM is implemented. It calls it an imported carbon pricing mechanism and will initially focus on areas such as iron, steel, aluminum, fertilizer, hydrogen, ceramics, glass and cement.

This tax may be within 14-24% of the total import value of the free allowance under the ETS (Emission Trading System). In a recent visit to London, Business and Industry Minister Piyush Goyal expressed concerns about the tax and conveyed that India might consider retaliation if the UK continues to implement the plan.