India will retaliate if EU goes ahead with carbon tax: Goyal
May 7, 2025
As India and the EU accelerate FTA negotiations, India has warned of retaliation if the EU proceeds with its Carbon Border Adjustment Mechanism (CBAM) carbon tax on imports, set to begin in 2026.
As India and the European Union (EU) speed up negotiations on a free trade agreement (FTA), New Delhi has warned the 27-member bloc that any move to go ahead with its carbon tax on imports will invite retaliation.
“We will retaliate for whatever non-tariff barriers come in,” commerce and industry minister Piyush Goyal said at an event.
While the FTA will bring down tariffs, the carbon tax — Carbon Border Adjustment Mechanism (CBAM) — will bring in new import duties through the back door, negating any gains that India might expect in the products covered by the carbon tax. Both sides are aiming to conclude the FTA talks by the end of this year.
The EU will start collecting carbon tax from January 2026 on select products like iron and steel, aluminium, cement, electricity, hydrogen and fertilizers. This tax will be imposed on all imports of these products to the EU if the carbon emission at the emission stage is higher than a prescribed threshold.
“It (the carbon tax) will actually lead to inflation, infrastructure becoming more expensive, automobiles becoming more expensive in Europe. It will also open up a plethora of opportunities for us. Not only in Europe but also in the rest of the world,” Goyal said.
Referring to the recent upheaval in world trade after US President Donald Trump announced overhaul of tariff rates, the minister said it is also a great opportunity for India as “it is a friend of every country”.
Last week, the minister visited three European countries, including the UK, with which India is negotiating an FTA or has already concluded one.
In Brussels, during a meeting with EU commissioner for trade and economic security Maroš Šefcovic, Goyal had said that negotiations on the FTA should be equally focussed on non-tariff barriers and that regulatory frameworks must be inclusive, proportionate, and avoid restricting trade.
The EU has some of the toughest standards on products entering into its territory. These products require multiple certifications to ensure that they comply with EU standards.
In Oslo, Goyal met in Norwegian minister of trade and industry Cecilie Myrseth and foreign minister Espen Barth Eide, and discussed the implementation of the India-EFTA Trade and Economic Partnership Agreement (TEPA). The agreement with European Free Trade Association (EFTA) — that includes Switzerland, Norway, Iceland and Liechtenstein — was signed in March last year and is awaiting completion of legal formalities before it is implemented.
[The Financial Express]
