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What do you understand by carbon border tax? Also, assess the advantages and disadvantages that India is likely to face with the imposition of this tax.

Topic: Conservation, environmental pollution and degradation, environmental impact assessment.

6. What do you understand by carbon border tax? Also, assess the advantages and disadvantages that India is likely to face with the imposition of this tax. (250 words)

Reference:  The Print

Why the question:

At the recent G-20 ministerial meeting on environment and climate change in Italy, developing countries, including India, are expected to raise their concerns over the European Union’s (EU’s) recent proposal on the first of its kind “Carbon Border Tax”.

Key Demand of the question:

Discuss the concept of Carbon Tax and assess the advantages and disadvantages that India is likely to face with the imposition of this tax.

Directive:

Assess – When asked to ‘Assess, we must look into the topic (content words) in detail, inspect it, investigate it and establish the key facts and issues related to the topic in question. While doing so we should explain why these facts and issues are important and their implications.

Structure of the answer:

Introduction:

Start with definition of Carbon border Tax.

Body:

A carbon border tax is a tax on carbon emissions imposed on imported goods from countries with less strict climate policies. It aims to create a level playing field between imports and domestic production.

The main purpose of the EU’s proposed Carbon Border Adjustment Mechanism (CBAM) is to address “carbon leakage” — when companies decamp to places with cheaper pollution costs and looser climate regulations.

Discuss its key features. Explain its impact for India. India, along with other developing countries, has long opposed the EU’s proposed carbon border tax. In April, it issued a joint statement with the BASIC bloc — Brazil, South Africa, India and China — calling CBAM “discriminatory“. The concern is that the border tax will ramp up prices of their goods in Europe and shrink demand.

Conclusion:

Conclude with what should be the way forward.