{"id":56852,"date":"2025-07-26T11:15:57","date_gmt":"2025-07-26T05:45:57","guid":{"rendered":"https:\/\/vajiramandravi.com\/current-affairs\/?p=56852"},"modified":"2025-07-26T11:15:57","modified_gmt":"2025-07-26T05:45:57","slug":"india-uk-fta-ignores-carbon-tax-relief-raising-export-concerns","status":"publish","type":"post","link":"https:\/\/vajiramandravi.com\/current-affairs\/india-uk-fta-ignores-carbon-tax-relief-raising-export-concerns\/","title":{"rendered":"India-UK FTA Ignores Carbon Tax Relief, Raising Export Concerns"},"content":{"rendered":"<h2><b>India-UK FTA Carbon Tax Latest News<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">India\u2019s push to secure relief for its small and medium enterprises from the UK\u2019s Carbon Border Adjustment Mechanism (CBAM) has failed to find space in the final text of the India-UK Free Trade Agreement (FTA) released recently.\u00a0<\/span><\/li>\n<\/ul>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Despite India\u2019s efforts, no resolution or concession on the contentious carbon tax issue was included in the deal \u2014 raising concerns about potential cost burdens and trade disadvantages for Indian exporters in the future.<\/span><\/li>\n<\/ul>\n<h2><b>UK\u2019s Expanding Carbon Tax Regime<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The UK\u2019s Carbon Border Adjustment Mechanism (CBAM), set to begin in January 2027, will initially apply to <\/span><span style=\"font-weight: 400;\">high-emission sectors such as aluminium, cement, fertiliser, hydrogen, and iron &amp; steel<\/span><span style=\"font-weight: 400;\">.\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">CBAM will levy carbon taxes on imported carbon-intensive goods.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">However, the UK government has stated that the scope of CBAM could expand beyond 2027 based on evolving data, carbon leakage risks, and technological developments.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This poses a growing challenge for India, as future exports across a wider range of sectors may face carbon-based tariffs.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Despite a <\/span><b>12.6% rise in India\u2019s exports to the UK in 2024\u201325<\/b><span style=\"font-weight: 400;\">\u2014reaching $14.5 billion\u2014and total bilateral goods trade rising to $21.34 billion, the expanding CBAM regime could threaten India\u2019s competitiveness in the UK market.<\/span><\/li>\n<\/ul>\n<h2><b>India-UK FTA Ignores Carbon Tax Relief: Concerns for Indian Exporters<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">India\u2019s attempt to secure exemptions for its small and medium enterprises under the UK\u2019s upcoming Carbon Border Adjustment Mechanism (CBAM) has failed, as the final text of the India-UK Free Trade Agreement (FTA) does not address the issue.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">This omission is significant, as it undermines the broader benefits of the FTA, which promises zero-duty access for 99% of Indian exports.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Indian exporters of carbon-intensive goods, <\/span><b>valued at around $775 million annually<\/b><span style=\"font-weight: 400;\">, now face the risk of additional duties based on the UK\u2019s carbon emission calculations.<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The situation is further complicated by similar measures planned by the EU, which also refuses to treat CBAM as a trade issue.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">The absence of legal safeguards in the FTA could weaken India\u2019s negotiating position in future trade deals and affect its industrial competitiveness in Western markets.<\/span><\/li>\n<\/ul>\n<h2><b>India May Challenge UK\u2019s Carbon Tax at WTO<\/b><\/h2>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">With no concession secured on the UK\u2019s CBAM in the recent FTA, India may consider challenging the measure at the WTO, citing violations of <\/span><b>Special and Differential Treatment (SDT) norms<\/b><span style=\"font-weight: 400;\"> meant to protect developing nations.<\/span>\n<ul>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">SDT norms in trade agreements allow developed countries to give preferential treatment to developing nations.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"2\"><span style=\"font-weight: 400;\">These provisions recognize the developmental challenges faced by poorer countries and aim to help them better integrate into and benefit from the global trading system.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">However, trade law experts caution that delays due to the WTO\u2019s dysfunctional Dispute Settlement Body (DSB) could render such a challenge ineffective by the time CBAM is fully enforced.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">Moreover, given the EU and UK\u2019s strong influence at the WTO, experts say a ruling against CBAM is unlikely.\u00a0<\/span><\/li>\n<li style=\"font-weight: 400;\" aria-level=\"1\"><span style=\"font-weight: 400;\">At best, India may push for regulatory adjustments rather than full withdrawal of the carbon tax.<\/span><\/li>\n<\/ul>\n<p><b>Source:<\/b> <a href=\"https:\/\/indianexpress.com\/article\/business\/india-uk-carbon-tax-trade-pact-10148660\/\" target=\"_blank\" rel=\"nofollow noopener\"><span style=\"font-weight: 400;\">IE<\/span><\/a><span style=\"font-weight: 400;\"> | <\/span><a href=\"https:\/\/economictimes.indiatimes.com\/news\/economy\/policy\/india-fails-to-secure-exemption-from-uk-carbon-tax-in-trade-agreement-gtri\/articleshow\/122902274.cms?from=mdr\" target=\"_blank\" rel=\"nofollow noopener\"><span style=\"font-weight: 400;\">ET<\/span><\/a><\/p>\n","protected":false},"excerpt":{"rendered":"<p>India-UK FTA fails to address UK&#8217;s carbon tax, risking Indian exports. India may challenge it at WTO citing unfair trade practices.<\/p>\n","protected":false},"author":18,"featured_media":56858,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[18],"tags":[1815,60,22,59],"class_list":{"0":"post-56852","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-upsc-mains-current-affairs","8":"tag-india-uk-fta-carbon-tax","9":"tag-mains-articles","10":"tag-upsc-current-affairs","11":"tag-upsc-mains-current-affairs","12":"no-featured-image-padding"},"acf":[],"_links":{"self":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/56852","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/users\/18"}],"replies":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/comments?post=56852"}],"version-history":[{"count":0,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/posts\/56852\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media\/56858"}],"wp:attachment":[{"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/media?parent=56852"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/categories?post=56852"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/vajiramandravi.com\/current-affairs\/wp-json\/wp\/v2\/tags?post=56852"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}