India-EU trade talks may adopt middle ground on carbon tax| India News

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**Rephrased Title:** EU, India Reach Middle Ground on Carbon Tax in Free Trade Talks **Rephrased Article:** India and the European Union are poised to reach a compromise on the contentious carbon tax issue, a major hurdle in their ongoing free trade negotiations. According to sources, the two sides are converging on a mutually beneficial solution that would allow India to offset its carbon tax liabilities under the EU's Carbon Border Adjustment Mechanism (CBAM). The breakthrough comes ahead of the European Union leaders' visit to India next week, where the two sides are expected to announce a deal on the bilateral free trade agreement (FTA). The FTA negotiations, which were relaunched in 2022, have been in an advanced stage of conclusion. Under the proposed middle path, India and the EU could align their methodologies for measuring emissions, allowing India to leverage its existing Carbon Credit Trading Scheme (CCTS) and other initiatives to offset some of the costs associated with CBAM. Alternatively, the two sides could consider a time and sector-specific moratorium on the implementation of CBAM, giving Indian industries time to invest in clean technology. Experts welcome the EU's willingness to accommodate India's concerns, saying that decarbonisation of India's manufacturing sector should be assisted financially and technologically by the EU, rather than shifting the costs onto India. They also stress the need for a rebalancing mechanism to protect Indian industries, particularly small and medium enterprises (SMEs), which may face significant compliance costs due to CBAM. The proposed pact may also include provisions for ensuring that funds from the carbon tax stay within borders and for the EU to provide additional decarbonisation-climate finance to developing countries. Analysts suggest that recycling of CBAM revenues, support for monitoring and reporting of emissions, and exemptions for least developed countries could be part of the package. As the EU and India move closer to a deal, experts emphasize the need for the Indian government to provide funding support to MSMEs to help them adopt clean technologies and comply with CBAM standards. The successful conclusion of the FTA negotiations is seen as a significant boost to India's trade relations with the EU, which is one of the country's largest trading partners.