India reacts sharply to EU's proposed carbon tax

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SME Times News Bureau | 29 Mar, 2010
While the European Commission is planning to impose a carbon tax at EU borders, India warned that it could exercise the option of moving the WTO Dispute Settlement Body if the EU and the US take any such move against Indian exports, according to a media report.

"If they (EU and US) impose such a tax, we will take them to the WTO dispute settlement forum," Environment Minister, Jairam Ramesh was quoted by the media report on Sunday.

A carbon tax is an environmental tax on emissions of carbon dioxide.

Carbon taxes already exist in EU members Sweden, Finland and Denmark. In France the idea is being hotly debated. But recently, the European Commission is planning an EU-wide minimum tax on carbon as part of the EU’s green energy agenda - a move which will make difficult for exporters from developing countries in operating across the EU.

"We will deal (with this) through hard negotiations. Such barriers are not going to be WTO-compatible and we will fight it," Ramesh was reported as saying.

The proposed curbs are being planned as part of the ongoing tussle between the developed and the developing countries on carbon emission, particularly the collapse of the Copenhagen Summit recently.

A 2008 EU plan against global warming provided for implementation of such a tax regulation which is now known as carbon inclusion mechanism.

Similarly, the US has been working on a complex climate bill that would apply different carbon controls to individual sectors of the economy, and of which a carbon tax will just be part.

Meanwhile, according to the media report, the Ministry of Commerce and Industries is studying the possible impact of the proposed carbon tax on India's exports of items like steel, iron, aluminium, cement and chemicals.