In new trade deal, how India and EU navigated friction over carbon tariffs

NEW  new delhi:  republic of india and the European unification (EU) feature in agreement(p) on several measures to deal with the 27-member’s bloc’s tariff on carbon-intensive imports, including the creation of a technical working group and a proposed agreement to support New Delhi’s decarbonisation efforts, people familiar with the matter said on Wednesday.The tariff, known as the Carbon Border Adjustment Mechanism (CBAM), emerged as one of the most contentious issues in negotiations for the free trade agreement (FTA) concluded by the two sides on Tuesday. The FTA, to be signed after legal scrubbing, is being described by both sides as a “living agreement” on which work will continue on key issues.Also Read: India, EU play their trump card in ‘mother of all’ trade pactThe EU has ruled out any concessions under CBAM as it is equally applicable to all foreign partners of the bloc and to Europe’s domestic industry, and the two sides agreed to create a technical working group to ensure “complete visibility” on how the carbon footprint is measured and the tariff is calculated to resolve outstanding issues, the people said on condition of anonymity.The Indian side ensured that Indian verifiers will be accredited by the EU to audit a firm’s carbon footprint as there will be problems of cost and access if verifiers are located only in Europe, the people said. The EU also agreed to New Delhi’s proposal that if the bloc shows flexibility to any country under CBAM, the same flexibility will automatically apply to India, they said.With India’s power ministry working on a carbon pricing policy to incentivise firms reducing emissions, taxes collected under the proposed policy will be accounted for under CBAM to ensure there is no double levy on Indian industry, the people said. “We have kept it as a living dialogue so that any other measure arising [in future] can be taken on board,” one person said.India and the EU will sign a memorandum of understanding (MoU) that will see the bloc working with New Delhi to help Indian industries reduce their carbon footprint. The EU will provide technical assistance, technology and funding to ensure carbon reduction, and has committed around $500 million for the first two years under this initiative.The people said arrangements on mobility for Indian students and professionals under the FTA and a separate comprehensive framework for cooperation on mobility were a key outcome of the trade deal. A second person described the mobility commitments as among the best ever by the EU, covering intra-corporate transfers, contractual service suppliers, independent professionals, and trainees.Intra-corporate transfers will be allowed across all sectors of services, with the initial duration of stay being three years, which can be extended by two years. Spouses and dependents of intra-cooperative transfers will also be covered. The provisions related to contractual service suppliers will apply to 37 sectors and those for independent professionals to 17 sectors, including key sectors of interest to India such as IT and business and professional services, the people said.Student mobility will be allowed without restrictions, and they will be allowed to take up post-study work opportunities. With student numbers set by individual EU states, the comprehensive framework will encourage members of the bloc to continue fulfilling their enabling obligations for students, the people said. “The current trajectory shows an uptick in students going to Europe, and this trajectory will get a boost because the framework will provide more certainty and predictability,” a third person said.Both India and the EU, the people said, are keen on signing and ratifying the FTA as quickly as possible, though the process is expected to take some time as several processes have to be completed, including legal scrubbing by both sides and approval of the deal by the European Council, European Commission and European Parliament.“There is a political commitment on both sides to expedite this. Our teams will work on both sides to see how we can expedite this process,” the second person said. “Recent contacts with all key stakeholders lead us to believe there’s a commitment from the EU side to get this done in an accelerated timeframe.”