India proposes Border Adjustment Mechanism (IBAM) to retain carbon revenues from EU's CBAM
The article discusses the European Union's Carbon Border Adjustment Mechanism (CBAM), effective January 1, 2026, which imposes a carbon price on imports. It argues that CBAM shifts decarbonisation burden to developing countries while retaining revenue in Europe. India should implement an India Border Adjustment Mechanism (IBAM) to impose its own carbon-based charge on CBAM-covered exports, ensuring revenues stay in India. This IBAM should be developed through Annex 14-A of the India-EU FTA to be recognized as a "carbon price paid in the country of origin" under CBAM Article 9, preventing double-pricing and financing India's green transition.
Key Points
- The EU's Carbon Border Adjustment Mechanism (CBAM) will impose a carbon price on imports starting January 1, 2026, raising concerns about revenue retention.
- India should introduce an India Border Adjustment Mechanism (IBAM) to collect carbon-based charges on its exports, keeping the revenue domestically.
- IBAM should be designed in coordination with the EU through Annex 14-A of the India-EU FTA to ensure it's recognized under CBAM Article 9.
- The revenues from IBAM should be ring-fenced for verifiable green projects, supporting India's green transition.
- This approach aims to prevent double-pricing for Indian exporters and ensure India retains control over its carbon revenues.
Exam Facts
- EU's Carbon Border Adjustment Mechanism (CBAM) comes into effect on January 1, 2026.
- The India-EU Free Trade Agreement (FTA) negotiations concluded on January 27, 2026.
- CBAM Regulation Article 9 allows deduction of embedded emissions that have already borne a carbon price in the country of origin.
- India's Carbon Credit Trading Scheme (CCTS) was notified in 2023.
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