Developed countries imposing carbon tax would affect India.

India has been making tremendous efforts to be a five-trillion-dollar economy where thrust on exports is major for a boost to its economy. It has been making substantial efforts to increase its exports, with new markets emerging in developed countries like America, Japan, and the European Union. However, these developed countries are now considering imposing carbon taxes on goods imported from India and other developing countries. This could have a significant impact on India’s exports, particularly in the sectors that are carbon-intensive.

Initially, the carbon tax will be imposed on high-emission products, but gradually, the tax will be applied to all products. As a result, the number of products subject to the carbon tax will increase, and by 2034, if developed countries impose carbon taxes on India, it could affect 40% of India’s total exports, which is approximately 38.3 trillion.

From October of this year, the process of imposing a carbon tax will begin. Within a few months, it will be decided which products will be subject to a carbon tax. In 2024, the carbon tax will be imposed again. The UK will also follow it, and then Japan, Canada, European Union, America, and Australia along with other developed countries will follow. No product will be exempt from the carbon tax. This is big news for India as 40% of its exports will be affected due to the informed Carbon Border Tax. Out of India’s total exports, 38.3% will be subject to a carbon tax in European Union, the UK, Canada, Japan, and the USA. Other developed countries, including Australia

The carbon tax that will be levied will be substantial. 40% of the product category being exported from India to these nations will be in this tax range ambit. It’s estimated that this tax will be in the range of 20-35%, whereas it will be 90% in some of the product categories. Carbon Tax is levied based on the carbon emission at the time of manufacturing of the product. European Union has applied for a 90% carbon border tax on cement since it is a material that is known to release a significant amount of carbon emissions. Cement is not the only product that emits carbon; chemicals, glass, iron and steel, non-ferrous metals, non-metallic minerals, refineries, fertilizers, power generation, and other industries also contribute significantly to carbon production. Therefore, they too may face a carbon tax.

Carbon tax on Indian exports, particularly on cement. This will make it very pricey to export to European countries and the United States. Thus impacting exports. In light of this, the FTA entered will lose its relevance. This point of Cardon Border tax should be a major point of discussion when an FTA is being discussed between India and Europe

Carbon dioxide emissions are highest in China in global production, with a share of 22% while the United States follows at 17%. The European Union is in third place with 10%. This means that India will need to increase its output in order to create a new equilibrium.

According to experts, America is China’s biggest trading partner 16.2% of total exports), but China is expanding its wings in other countries as well. India will have to create its own identity and create new markets in small countries in order to maintain its position. Also, China has shifted its product strategy to concentrate more on consumer products, similarly, India should focus more on products that would mitigate carbon tax

To mitigate the impacts of carbon taxes, India can export products that have a low carbon footprint. These products include renewable energy technologies, such as solar panels and wind turbines. India has a significant advantage in the production of these technologies due to its low labor costs and favorable climate conditions. India is already a significant exporter of solar panels, and its exports are expected to increase in the coming years.

Another product that India can export to mitigate the impacts of carbon taxes is electric vehicles (EVs). As the world moves towards cleaner transportation, the demand for EVs is expected to increase significantly. India is well-positioned to become a major exporter of EVs due to its large automobile industry and low labor costs. In addition, India is home to several manufacturers of lithium-ion batteries, a critical component of EVs.

India can also increase its exports of organic products to mitigate the impacts of carbon taxes. Organic products have a low carbon footprint as they are produced without the use of synthetic fertilizers and pesticides. India is already a significant exporter of organic products such as rice, spices, and tea. By increasing its exports of organic products, India can position itself as a leader in sustainable agriculture and mitigate the impacts of carbon taxes on its agricultural sector.

Finally, India can increase its exports of textiles made from sustainable materials such as bamboo and organic cotton. The textile industry is a significant contributor to India’s economy, and exports account for a significant portion of its revenues. By producing textiles from sustainable materials, India can reduce its carbon footprint and position itself as a leader in a sustainable fashion.

In conclusion, carbon taxes implemented by developed economies can have significant impacts on trade patterns. However, India can mitigate the impacts of these taxes by exporting products that have a low carbon footprint. These products include renewable energy technologies, EVs, organic products, and sustainable textiles. By positioning itself as a leader in sustainable products, India can maintain its competitiveness in the global market and reduce its carbon emissions.