Dealing with economic liability of CBAM and India’s preparedness

As the road unwinds towards Belem for COP 30, contentious issues of carbon emission dominate the global discourse.

- GARGI SHARMA GOEL

Countries across the globe have been taking series of steps to decarbonise their industries by adopting market-based approaches by pricing their carbon emission as well as recycling the revenue thus generated to fulfil their mitigation and adaptation finance needs.

These carbon pricing mechanisms, however, allegedly may give rise to ‘carbon leakage’, when applied unilaterally by countries. This underpins the emergence of contentious Carbon Border Adjustment Mechanism (CBAM) by EU and UK, rationalised as a means to curb carbon leakage and protect their domestic industries from competitiveness disadvantage due to carbon pricing of their emissions.

However, CBAM is fraught with limitations in controlling carbon leakage due to resource reshuffling, insufficient coverage of products owing to complex value chains and impacts on downstream products etc, EU is already confronting multiple implementational issues due to lack of awareness and reporting uncertainty among its importers, difficulties in obtaining information from suppliers due to rudimentary nature or absence of monitoring, regulatory and verification (MRV) framework in most exporting jurisdictions. EU has initiated a massive stakeholders consultation drive in August 2025 by inviting feedback/suggestions to overcome its mounting challenges in CBAM implementation.