Like many developing economies, India faces coercion from the United Nations and Europe to conform to climate policies, especially through the imposition of carbon taxes on imports into their countries. But Delhi is not about to bend to such tactics.
“If they (EU and U.K.) put in a carbon tax, we’ll retaliate,” said India’s Union Minister Piyush Goya at the Columbia India Energy Dialogue in New York City. “I think it will be very silly, particularly to put a tax on friendly countries like India.”
That isn’t a bluff. It’s a moral, strategic and scientific imperative grounded in realpolitik and economic logic.
India and the U.K. have inked a trade deal that promises to boost bilateral trade by more than $33 billion and increase U.K. gross domestic product and wages by many billions.
On paper, this deal is a triumph for both nations, removing duties on 99% of Indian goods entering the U.K. For India, this means greater market access for textiles, agriculture and manufactured goods – sectors that employ millions and drive economic growth.
Yet, the U.K.’s pending Carbon Border Adjustment Mechanism (CBAM) remains in place, with no exemptions for Indian steel, cement and aluminum, despite the trade agreement.
Starting January 2027, the U.K. is to impose a levy on these “carbon-intensive” imports, supposedly to compensate for the difference between the U.K.’s domestic carbon tax and India’s lower assessment at home. The tax on imports is to prevent “carbon leakage” — the idea that emissions are “outsourced” to countries with fewer regulations.
This hocus-pocus is nothing more than repugnant virtue signaling that penalizes manufacturers in developing countries for using the very fossil fuels that powered the West’s rise in the 19th and 20th centuries.
India’s export of these products to the EU and U.K. are a critical part of its economic engine. In 2022 alone, 27% of India’s iron, steel and aluminum exports went to the EU.
Yet, the EU’s CBAM, set to take effect in 2026 prior to the U.K. tax, would slap tariffs of 20-35% on these goods.
For Indian exporters, this translates to a steep cost increase. India’s predominantly coal-based blast furnaces have higher carbon intensity of around 2.5-2.6 metric tons of CO₂ emissions per metric ton of steel produced in comparison to the global average of 1.85 metric tons of CO2 . This means a higher CBAM assessment for India.
Profit margins for steel exports could shrink, while aluminum exporters might face a sudden surcharge once indirect emissions from coal power are factored in. Take the case of Tata Steel, which employs over 75,000 people and produces 30 million tons of steel annually. A 20-35% carbon tax under the EU’s CBAM would erode profit margins, forcing layoffs or price hikes that could cost it market share.
India’s dismissal of the climate war on fossil fuels is grounded in necessity and science. Economically, the nation aims to become a $5 trillion economy by 2027, a goal that demands rapid industrialization and infrastructure growth.
Steel, cement, and aluminum are the building blocks of this ambition, used in everything from bridges to skyscrapers, and an important source of export revenue. Fossil fuels, particularly coal, are the lifeblood of these industries, providing the energy needed to keep production costs low and globally competitive.
Coal generates more than 70% of India’s electricity. It powers the factories that make steel and cement. It keeps the lights on in rural hospitals and schools. And it fuels the economic engine that has lifted 415 million people out of poverty in the past two decades.
The modern crusade against fossil fuels is based on the false premise of a disintegrating global environment. But that is not the case. Carbon dioxide is not a toxin. It is a colorless, odorless gas essential to life on Earth.
Even the term “carbon emissions” is a sleight of hand. The emissions are carbon dioxide, but calling them “carbon” conjures images of potentially harmful soot and smoke. Fear perpetrated by lies have made people less resistant to destructive policies like CBAM. However, India won’t bow to carbon taxes and it won’t join an unscientific climate war that sacrifices its future. The U.K. and EU would do well to listen, lest they find themselves on the losing end of an Asian-dominated trade battle over manufactured goods.
This commentary was first published at RealClear World May 24, 2025 and is reprinted by permission.
Photo by sheikh sohel on Unsplash.
