Industry seeks govt intervention on data requirements for EU's carbon tax

Indian industry from sectors like steel has flagged its serious concerns over the 'burdensome' work of data reporting requirement to comply with the European Union's carbon tax decision and has urged the government to take up the matter with the EU, an official said.

The issue was flagged in a meeting called by the commerce ministry on September 6. The government and industry held discussions on implementation issues regarding the European Union's move to impose carbon tax or carbon border adjustment mechanism (CBAM).

Industry is of the view that the data sharing exercise is burdensome as the EU is seeking a lot of information.

"Second, the industry also stated that the EU is also seeking commercially sensitive information. They want reduction in this reporting requirement. We discussed all those issues as to how that reporting will be done, we are trying to understand their problems," the official added.

According to think tank GTRI co-founder Ajay Srivastava, CBAM imposes massive data compliance requirements on Indian exporters.

"For every consignment, exporters have to share hundreds of thousand data points, explanations, and methods used with EU counterparts. Neglect or misreporting leads to stiff penalties," Srivastava has said, adding, with low level of domestic data capture, Indian firms need to set up systems first before reporting data.

The official also said that the power ministry is working on the Carbon Credit Trading Scheme (CCTS). India is pressing the European Union for a mutual recognition agreement for these CCTS certificates as it helps the domestic players.

The September 6 meeting was attended by senior officials from the Department for Promotion of Industry and Internal Trade, ministries of Finance, Power, Steel and Mines, besides representatives of the steel and engineering sector.

The meeting was a follow-up of a similar meeting held in May where the industry was asked to be ready for the carbon border adjustment mechanism (CBAM).

The tax would have an adverse impact on India's exports of metals such as iron, steel and aluminium products to the EU.

According to a report by think tank Global Trade Research Initiative (GTRI), the tax will have an adverse impact on India's exports of these sectors.

In 2022, India's 27 per cent exports of iron, steel, and aluminium products worth USD 8.2 billion went to the EU.

The compliance of the tax is in two parts -- a requirement of filing data from October and later imposition of the tax.

The CBAM or carbon tax (a kind of import duty) will come into effect from January 1, 2026, but from October 1 this year, domestic companies from seven carbon-intensive sectors, including steel, cement, fertiliser, aluminium and hydrocarbon products, will have to share data with regard to carbon emissions with the EU.

GTRI report has stated that there are penalties on not reporting, negligent reporting or mis-reporting of data from October 1 onwards.

At the multilateral level, India and certain other countries have flagged their concerns to the World Trade Organisation (WTO) on CBAM. India had already submitted a paper on the subject to the WTO in February.

Though the 27-member European Union (EU) is claiming CBAM to be a part of their climate action efforts, industry from countries like India are of the view that it is a trade-related measure.

Domestic companies from different sectors, such as steel, are taking steps like setting up a captive solar power plant and following climate-friendly manufacturing processes to reduce carbon emissions. The government is also taking steps like afforestation and promotion of the use of renewable energy.