Impact of UK's Carbon Tax on India's Exports: A Trade Challenge

India failed to secure an exemption from the UK's carbon tax in their new trade agreement, affecting carbon-intensive exports like steel and aluminum. Starting 2027, the UK will impose taxes under the Carbon Border Adjustment Mechanism, prompting concerns of trade barriers and potential retaliatory measures from India.

India's recent trade agreement with the UK has stirred concerns as the country failed to secure an exemption from a looming carbon tax, potentially impacting its carbon-intensive exports. Analysts warn that this could significantly affect sectors such as steel and aluminum starting in 2027.

The UK's Carbon Border Adjustment Mechanism, set to be implemented from January 2027, poses a substantial challenge for Indian exports. Under this mechanism, the UK will impose a tax on imported goods such as iron, steel, and cement, with rates varying between 14 and 24 percent.

Officials in India, recognizing the serious trade implications, have expressed concern over the tax, labeling it as a trade barrier. They highlight an asymmetry in trade concessions and suggest that India may retaliate or adjust concessions if domestic exports are adversely affected by these regulatory changes.

(With inputs from agencies.)