Summary
In an Indian Express opinion piece, McKinsey senior partner Rajat Gupta argues that India should keep contesting the unfair parts of climate-linked trade rules such as the EU's Carbon Border Adjustment Mechanism, but should mainly use the demand and price premiums these rules create.
He suggests that exports of green ammonia, sustainable aviation fuel and electrical equipment to regulated markets could fund India's own low-carbon industry. The EU is phasing out free allowances for its producers between 2026 and 2034 and its ReFuelEU Aviation rule requires 2 per cent SAF in 2025, rising to 70 per cent by 2050.
He also argues that India's Carbon Credit Trading Scheme should move from plant-specific to sector-wide targets, with a carbon price high enough to change investment and to keep more carbon revenue in India under CBAM. Critics such as GTRI see CBAM as a discriminatory border tax.
WHY IT MATTERS FOR UPSC & STATE PCS
An Indian Express opinion piece argues that India should turn foreign green regulation, from the EU's CBAM to ReFuelEU Aviation, into export advantage. It comes as CBAM's definitive phase began on 1 January 2026 and India's carbon market is still taking shape.
Standard News
Sell Into the Rules: Why India Should Monetise Green Trade Instead of Only Resisting It
India's position on rules like the EU's CBAM has mostly been protest. That protest is often justified, but it is not a strategy. These rules are not going away. The EU is phasing out free carbon allowances for its own producers on a fixed schedule from 2026 to 2034 and CBAM's scope is expected to grow.
India should keep contesting what is unfair. Its main effort, though, should go into getting paid by the very rules it objects to.
The Reasoning Most of the
India that will exist in 2070, the year of its net-zero target, has not been built yet. Every new steel plant, fertiliser unit and power line is a choice: build it fossil-fuelled now and rebuild it later or build it clean from the start.
Clean technology costs more at first because it needs more capital. Western green rules create buyers who are required to pay that premium. In effect, the European rules offer a subsidy to whoever can supply clean goods.
- Sustainable aviation fuel: ReFuelEU Aviation requires 2% SAF in 2025, rising to 6% in 2030, 20% in 2035 and 70% by 2050. Supply is scarce and sells at a premium. India's ethanol programme already reached 15% petrol blending in 2024.
- Green ammonia: the author reports that India has found some of the world's lowest prices. Long-term contracts with Europe, Japan and Korea could finance the first plants, which could later supply green fertiliser at home.
- Electrical equipment: this is the clearest gap. The market is about $500 billion, as reported and India holds under 2% of it. Premium foreign buyers can pay for the early, expensive phase. The domestic market gets the cheaper, scaled-up phase later.
The Strongest Counter-Argument
To adapt to CBAM is to endorse it. The principle of Common But Differentiated Responsibilities says those who caused most historical emissions should carry most of the burden. Article 3.5 of the UNFCCC says climate measures must not become disguised trade barriers.
GTRI estimates that CBAM works like a 20-35% tax on select Indian exports, affecting about 27% of India's exports to the EU. If India reorganises its industry around Europe's rule, it signals that unilateral border taxes work and every other economy that prices carbon will follow.
Why the Position Still Holds
This objection is serious, but it assumes that complying means conceding. It does not.
- Selling into a mandate is not paying a tax. ReFuelEU creates demand. Supplying SAF to it concedes nothing about CBAM's legitimacy. India can sell into one rule while challenging the other.
- Protest does not stop the charge. Indian exporters pay CBAM whether or not New Delhi objects. Refusing to adapt does not defend CBDR. It only hands the revenue to Europe.
- India can keep the revenue at home. CBAM lets importers deduct a carbon price already paid in the country of origin. A credible, sector-wide domestic carbon price under the CCTS means that money goes to India's treasury instead of Brussels.
Quick Facts
Key numbers & takeaways — revise these first
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CBAM: Regulation (EU) 2023/956; transitional reporting phase October 2023 to December 2025; definitive phase from 1 January 2026 Sectors covered: iron and steel, aluminium, cement, fertilisers, electricity, hydrogen EU free allowances phased out gradually from 2026 to 2034 Article 9 of CBAM lets importers reduce certificates for carbon prices paid in the country of origin ReFuelEU Aviation, Regulation (EU) 2023/2405: SAF at 2 per cent in 2025, 6 per cent in 2030, 20 per cent in 2035, 70 per cent by 2050 India's Carbon Credit Trading Scheme: notified June 2023, administered by the Bureau of Energy Efficiency India's net-zero target: 2070 GTRI estimate: CBAM equal to a 20 to 35 per cent tax on select Indian exports, affecting about 27 per cent of India's exports to the EU UNFCCC Article 3.5: climate measures should not be a disguised restriction on international trade
Connect the dots for your UPSC preparation.
Standard news covers the event. Log in to read our comprehensive analysis and uncover the hidden constitutional, structural, and ethical dimensions of this topic:
The full, sector-by-sector reasoning on how green ammonia, SAF and electrical equipment exports could finance India's own low-carbon build-out
The strongest version of the climate justice case against adapting to CBAM, built around CBDR, UNFCCC Article 3.5 and GTRI's tax estimate
How CBAM's Article 9 deduction turns a reformed, sector-wide CCTS price into revenue India keeps at home
Where the position would fail and what India must keep fighting for at the WTO and in trade talks
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