'Some economy will have to go down...': Commerce Minister Piyush Goyal on energy transition challenge

Commerce Minister Piyush Goyal on Tuesday said India has emerged as one of the most conscious nations when it comes to addressing the energy transition challenge. He said, despite being home to 17% of the world’s population, India has contributed only 3–3.5% of global carbon emissions. "Our per capita emissions remain among the lowest. Yet, the developed world has left us in the lurch." 

Europe is on the verge of implementing one of the most disruptive trade measures of our time — the Carbon Border Adjustment Mechanism (CBAM). Framed as an environmental regulation, it effectively acts as a carbon import tax on goods from countries that don’t meet Europe’s climate standards. 

During the Columbia India Energy Dialogue 2025, Goyal emphasized the necessity for a balanced approach to ensure that Western countries compensate Indian industry for any losses stemming from the regulation. This is crucial as the UK remains reluctant to offer concessions under its Carbon Border Adjustment Mechanism (CBAM), which seeks to levy duties on imports with high carbon emissions. 

"Europe will end up hurting its own future with these carbon tax imports. Europe needs to address its huge amount of waste in the country. Though I am not worried, because I can see the decline of Europe if they implement CBAM. If Europe does this, it will lead to more opportunities for us to explore. Some economy will have to go down for our economy to go up," Goyal said on Tuesday. 

CBAM rule

The draft UK CBAM law outlines that a charge will be imposed on imported goods starting on January 1, 2027. These goods, known as CBAM goods, come from industries with high carbon emissions such as steel, iron, cement, fertilisers, hydrogen, and aluminum. It is expected that India's exports of iron, steel, aluminum, ceramics, and cement will be impacted by the implementation of the UK CBAM in 2027, hindering the progress of a trade agreement between the two nations.

Delhi argues that the UK CBAM law goes against the CBDR principle of multinational climate negotiations and views it as an unjust measure. The draft legislation also provides details on how emissions will be calculated and the CBAM rate will be established, linking it to a domestic sectoral price tied to the UK Emissions Trading Scheme. Unlike Western systems that focus on absolute emissions, India's Carbon Credit Trading Scheme (CCTS) is based on emission intensity, which is deemed more suitable for developing countries.

In India, there has been significant opposition to the carbon price implemented by the European Union. A transition period requiring exporters to provide data to EU authorities has been in effect since October 1, 2023.

The complete implementation of the EU Carbon Border Adjustment Mechanism (CBAM) is anticipated to be mandatory starting in January 2027. The financial requirements associated with CBAM will commence in January 2026, with the compulsory acquisition and relinquishment of CBAM certificates set to commence in 2027.

This is of great importance to India, as over 15% of its exports are destined for the EU, amounting to $75 billion in goods sent in 2022–2023.

Finance Minister Nirmala Sitharaman and Goyal have previously criticised the CBAM as an "unfair" measure that infringes upon the principle of "common but differentiated responsibilities" (CBDR) in international climate discussions. According to this principle, all countries are required to address climate change, but their obligations should be proportional to their level of economic development.

While the EU has been taken to the WTO by several nations such as China, Russia, Brazil, and South Africa over CBAM, India has not yet filed a formal case. This is because both parties are currently engaged in discussions towards reaching a free trade agreement.