Carbon Border Tax

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The BASIC group, comprising India, China, Brazil and South Africa, recently said in a statement that “unilateral measures and discriminatory practices, such as carbon border taxes, that could result in market distortion and aggravate the trust deficit amongst Parties, must be avoided”.

About Carbon Border Tax:

  • A carbon border adjustment tax is a duty on imports based on the amount of carbon emissions resulting from the production of the product in question. As a price on carbon, it discourages emissions. 
  • The carbon border tax involves imposing an import duty on a product manufactured in a country with more lax climate rules than the one buying it.

European Union’s stand:

  • The European Union (EU) has proposed a policy — called the Carbon Border Adjustment Mechanism — to tax products such as cement and steel, that are extremely carbon intensive, with effect from 2026.
  • EU claimed that the tax will benefit the environment and provide a level playing field to companies, those opposing it call the tax unfair and protectionist.

BASIC group’s stand:

  • They say it puts the burden of climate compliance on developing countries, when historically, they have done much less to pollute the environment and yet are often more vulnerable to effects of climate change.

‘Carbon leakage’:

  • Some developed nations, in efforts to cut emissions, impose high costs on carbon-intensive businesses in their own countries.
  • Businesses can potentially sidestep this simply by moving production to a country with less stringent rules, a practice called carbon leakage.


Source : All India Radio