Carbon Border Adjustment Mechanism (CBAM)

Context:

Commerce and Industry Minister said government will take all necessary steps to protect Indian industry from any adverse impact of the Carbon Border Adjustment Mechanism.

About CBAM:

  • It is a plan to tax carbon-intensive products, such as iron and steel, cement, fertilizer, aluminium, electricity, and hydrogen, from 2026.
  • Propsed by – European Union (EU) in 2021.
  • Also known as a carbon border tax or a carbon leakage instrument.

Carbon border tax is a tax on carbon emissions imposed on imported goods from countries with less strict climate policies.
Carbon leakage refers to a situation where a company decides to move their production from a country with stringent policies, to a country that is more lenient, leading to an increase in greenhouse gas emissions. 

  • Aim: To eliminate the difference in carbon price paid by companies subjected to the EU’s Emissions Trading System (ETS) or its domestic compliance-based carbon market.
  • Part of the “Fit for 55 in 2030 package”
  • Functioning –
    • EU importers buy carbon certificates corresponding to the carbon price on the lines of EU’s carbon pricing rules.
    • Deductions can be claimed from their CBAM liability if Non-EU producer has already paid for the emission in the country of production.
  • Similar Measures adopted by EU –
    • Social Climate Fund will support people in Europe with the costs of transitions.
    • Reforming Emission Trading System (ETS): European industries and energy companies should cut emissions by 62 % by 2030 compared to 2005 levels, compared to previous target of 43%.

Fit for 55 in 2030 package – EU’s plan to reduce GHG emissions by at least 55% by 2030 compared to 1990 levels, in line with the European Climate Law.

Source: The Hindu


Previous Year Question

Which of the following adopted a law on data protection and privacy for its citizens known as ‘General Data Protection Regulation’ in April, 2016 and started implementation of it from 25th May, 2018?

[UPSC Civil Services Exam – 2019 Prelims]|

(a) Australia
(b) Canada
(c) The European Union
(d) The United States of America

Answer: (c)


Practice Question

Consider the following statements with respect to the Carbon Border Adjustment Tax:
1. It is proposed by the World Trade Organisation (WTO).
2. It aims to tax products that are extremely carbon intensive.
3. India does not levy an explicit carbon price.
How many of the above statement(s) is/are correct?

 
 
 
 

Question 1 of 1

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