UPSC Daily Editorial Analysis | India-EU | 7 July 2022

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What the article is about?

  • Talks about the India-EU engagement and carbon neutrality.

Syllabus: GS-II International Relations, GS-III Carbon Neutrality

India-EU:

  • The EU is India’s third largest trading partner, while India is EU’s 11th largest trading partner.
    • In 2019-20, India-EU trade accounted for ₹63.8 billion (11.1% of total Indian trade) in goods, while a total of 1.9% of EU’s total trade in goods in 2020 came to India.
    • India exports almost 14% of its global exports to the EU. 

Carbon Neutrality:

  • At the forefront of the commitment to net-zero is the European Union, wants to be the first carbon-neutral region in the world by 2050.
    • It brought out the ‘European Union Green Deal’ in July last year to focus on a new growth strategy that aims to transform the EU society into a fair and wealthy one with a modern, resource-efficient and competitive economy.
    • To attain carbon neutrality, the EU has set forth immediate targets and has brought out the ‘Fit-for-55’ package, a communication of its 2030 climate targets.
    • A provision in the policy plan is the introduction of Carbon Border Adjustment Mechanism (CBAM), a carbon-pricing system proposed for imports into the EU.
    • The CBAM suggests taxing the imported goods-based difference between carbon used in the production of domestic and imported goods.
    • Proposed to be complementary to the EU Emission Trading Scheme (EUETS), during the transition phase of CBAM — beginning January 1, 2023 — importers will only have to report emissions embedded in the production of goods and are not obliged to pay a financial penalty.
    • The EU claims that CBAM is intended to reduce carbon leakage, create a level play- field for EU producers and encourage producers in other countries to adopt cleaner technologies.
  • Concerns:
    • Developing countries have raised their concern on the legality of CBAM pointing out its conflict with World Trade Organization (WTO) and the United Nations Framework Convention on Climate Change (UNFCCC) norms, and are afraid that it encourages protectionism.
    • Countries opposing the proposed revenue utilisation mechanism suggest that if CBAM is to be implemented, revenue collected from it should be used for cleaner technology adoption in developing countries. 

Conclusion

  • Talks on India-EU Free Trade Agreement (FTA) that were stalled a while ago have picked up again and are scheduled to take place in June. The target to finalise the Free Trade Agreement has been set for 2023-24.
  • Both India and the EU are committed to climate change, and the recent progress in India-EU alliance opens prospects of a customised partnership and mutual growth. India and EU can cooperate better by investing in cleaner and greener technologies in India and helping in cleaning up production in India.
  • Such a partnership will ensure that both India and the EU have their agendas of economic growth and sustainability fulfilled, a win-win situation for both entities. 



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