The European Union’s Proposed Carbon Equalisation System: Some Implications for India’s Exports

Abstract: In 2009, the European Union (EU) proposed to use border carbon measures, which could take the form of a direct or indirect “carbon tax”, against imports from its partner countries that were not following its emission norms. While the stated objective of the proposal was to prevent “carbon leakage”, or migration of industries to the so-called “pollution havens”, its real intent is to protect industries based in the territories of the EU Member States against foreign competition. The proposal could have wide ramifications for it could affect market access possibilities of a very large segment of the industries in the EU’s partner countries. This paper analyses the possible impact of the proposed measures on India’s exports through a very detailed examination of the available data.