Why India Is Right To Challenge EU’s Carbon Border Tax

The European Union’s Carbon Border Adjustment Mechanism is being positioned as a bold climate initiative. Its deeper implications, though, reveal a strategic recalibration of trade power rather than a genuine multilateral response to the climate crisis.

Born out of the EU’s internal climate architecture under the “Fit for 55” plan, CBAM seeks to impose a carbon levy on imports of emission-intensive products. The European Union’s “Fit for 55” plan represents a sweeping legislative initiative designed to reduce greenhouse gas emissions by a minimum of 55% by 2030, relative to 1990 levels. As a central pillar of the EU’s European Green Deal, this framework was formally endorsed in October 2023, positioning itself as a cornerstone in Europe’s ambitious pursuit of climate neutrality.

While the stated goal is to avoid carbon leakage, the operational effect is to transfer the EU’s domestic carbon cost structure onto exporters from the developing world, many of whom are still navigating basic development imperatives.

This mechanism rewrites the rules of global trade without the consent of those who must live with its consequences. CBAM introduces a new layer of compliance and cost under the pretext of environmental parity. It places carbon tariffs on goods such as steel, aluminium, and cement, demanding that foreign producers match European carbon pricing norms. This approach ignores the bedrock principle of differentiated responsibilities that the Paris Agreement upheld. It fails to acknowledge that emerging economies are not merely trading partners but also developing states with specific constraints on energy, infrastructure, and technology.

India has taken an unambiguous stand. Commerce and Industry Minister Piyush Goyal has termed CBAM “very very irrational regulations” and warned of reciprocal action if the EU proceeds. 

“If they will put in carbon tax… we will retaliate,” he stated, underlining that the EU’s proposed levy on Indian steel, aluminium, and cement—ranging between 20% and 35%—would not only hurt Indian exports but ultimately damage Europe’s own economic interests. Goyal further noted the incongruity of targeting “friendly countries” with such measures, especially when the foundational climate commitments made in Paris remain largely unmet. He emphasised that the world cannot ignore the disproportionate consumption patterns of high-prosperity nations, which fuel the global carbon load far more than production in developing economies.

India’s critique is grounded in a broader call for climate justice. Goyal pointed to the persistent failure of developed nations to deliver on their promises of technology transfer and concessional finance. “Our per capita emissions remain among the lowest. Yet, the developed world has left us in the lurch,” he said. In doing so, India reframes the climate debate around structural equity, asking whether the global order intends to reward historical responsibility or penalise developmental aspiration. Far from being defensive, this is a strategic articulation of an alternative climate logic—one that foregrounds behavioural excess, technological asymmetry, and financial unaccountability in the global North, rather than shifting the cost burden onto the global South.

The impact on Indian industry is immediate and material. Preliminary estimates suggest that exports worth billions of dollars are at risk of being taxed, placing additional pressure on sectors already working to decarbonise through domestic initiatives. CBAM does not differentiate between economies that are historic emitters and those that are still building core infrastructure. Nor does it account for domestic carbon costs that are not monetised but still borne in policy, subsidy, and transition investments. In bypassing these distinctions, the mechanism prioritises environmental accounting over economic reality.

India’s articulation of a calibrated response is rooted in strategic foresight. The proposal to consider domestic carbon taxation, where proceeds are reinvested in green technology and capacity-building, signals a commitment to climate responsibility on Indian terms. It is a defence of climate sovereignty. India’s message to the world is that global climate solutions must emerge through negotiation and consensus, not through fiscal imposition or trade recalibration.
 
The diplomatic challenge with CBAM lies in its precedent. If allowed to stand unchallenged, it risks legitimising a model where advanced economies define environmental standards and enforce them through trade levers. This is neither a sustainable climate pathway nor a credible trade doctrine. It marginalises the voices of the Global South and reintroduces a hierarchy into the climate dialogue at a moment when solidarity is most needed.
 
India’s position is a reminder that climate leadership must be built on equity and trust. In resisting CBAM’s structure, India is not isolating itself. It is opening a necessary front in the global conversation on how climate responsibility must be shared, how development priorities must be respected, and how global rules must be co-authored. This is a stand for the integrity of multilateralism in an era where unilateralism wears green robes. And it is a stand the world would do well to consider.