GDP seen dipping by 0.03 pc due to CBAM

 

India’s GDP could fall by 0.02 to 0.03% between 2026 and 2030 due to revenue outflows if the European Union’s Carbon Border Adjustment Mechanism (CBAM) is applied without a domestic carbon pricing system, according to a new working paper by public policy think tank Centre for Social and Economic Progress (CSEP). This would also curb household consumption, with urban families experiencing the most impact due to higher prices of carbon-heavy goods. However, if India implements its own carbon tax and keeps the revenue domestically, it can largely reduce the economic impact of the EU levy. The tariff is pegged to the carbon price in the EU Emissions Trading System (EU-ETS), which in 2026 is assumed at Rs 5,200 per tonne of CO2 equivalent, with a 5% annual rise as free allowances in the EU are phased out, as per a report.

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