CBAM to impact the future of industry, particularly those who are exporting

The main aim of CBAM is to protect EU industries from unfair competition by non-EU countries that do not have stringent carbon pricing policies. This initiative is part of the EU's broader efforts to achieve carbon neutrality by 2050.

The EU CBAM is a new policy that imposes a fee on the carbon emissions contained in certain imports. It is designed to ensure fair competition by addressing the cost of carbon paid by EU installations that follow the EU Emissions Trading System (ETS) and imported products. 

CBAM has been criticised as a trade-restrictive policy, especially by India, which has set a target of becoming carbon neutral by 2070. India has expressed concerns about CBAM at various international forums, including the World Trade Organisation (WTO), emphasizing the importance of non-discriminatory treatment for the same products and warning that such measures could lead to protectionist practices.

From 1 October 2023 until 31 December 2025, the transitional phase of CBAM will only require quarterly reports on the greenhouse gas emissions of specific products imported into the EU, covering both direct and indirect emissions. However, from 2026 onwards, the purchase of CBAM certificates will be mandatory to cover GHG emissions, with the cost of these certificates linked to carbon prices under the EU ETS.

The imposition of CBAM will result in an increased financial and administrative burden on Indian goods. Thus, a sizeable portion of India's exports to the EU will run the risk of becoming less competitive in the EU market due to these burdens.

Printing and related products are not currently under purview of CBAM. However, customers located in Europe due to expected similar carbon related taxes will try to opt for greener printers/products.

The impact of carbon tax on Indian printers and converters could be significant, especially for those exporting to the European market. Here are a few potential consequences:

Increased production costs: Regulations such as CBAM would impose additional costs on Indian printers, as they would need to pay carbon taxes on their exported products. This could lead to increased production costs, making it more difficult for Indian printers to compete with their European counterparts.

Need for greener technologies: To minimise the impact of carbon tax, Indian printers and converters may need to adopt greener technologies and practices to reduce their carbon footprint. This could involve investing in energy-efficient equipment, using renewable energy sources, and implementing waste reduction strategies.

Certification and compliance: Indian printers would need to ensure that their products meet the EU's carbon emission standards to avoid paying high carbon taxes. This requires obtaining certifications and adhering to compliance measures, which could be time-consuming and expensive.

Shift in market focus: Some Indian printers and converters may choose to shift their focus away from the European market to avoid the impact of carbon taxes. This could lead to competition in other markets, such as the USA or Asia-Pacific, where carbon pricing policies may be less stringent.

Collaboration and innovation: The introduction of regulations like CBAM could encourage collaboration between Indian and European companies to develop innovative solutions and share best practices.

In conclusion, the implementation of CBAM could have implications for the future for Indian printers and converters. To minimise the impact, Indian companies will need to adapt their operations and comply with EU carbon emission standards. This may also present an opportunity for India to adopt  greener technologies and practices.

Ganesh Kumar V has 15+ years of experience in the environmental and sustainability domain