India Criticises EU's Carbon Border Tax and Steel Import Curbs at the Berlin Global Dialogue

The Carbon Border Adjustment Mechanism, or CBAM, is an EU rule that puts a charge on the carbon pollution released while making certain goods abroad, when those goods enter the EU. In simple words, it is a carbon price at the border. If a steel bar made in another country released a lot of carbon dioxide, the EU importer must pay for that carbon, just as a European steel maker pays under the EU's own carbon market. The EU says this stops "carbon leakage", where factories move to countries with weaker climate rules.

The EU Emissions Trading System, or EU ETS, is the EU's carbon market. It sets a limit (a "cap") on the total greenhouse gases that big polluters such as power plants, steel mills and cement factories can release. Each company must hold one permit, called an allowance, for every tonne of carbon dioxide it emits, and can buy and sell allowances with others. This is called "cap and trade", and the cap is lowered every year so total pollution falls.

A Free Trade Agreement (FTA) is a deal between two or more partners to remove or sharply cut import taxes (tariffs) on most of the goods they trade with each other. Each side still keeps its own tariffs for countries outside the deal. Modern FTAs also cover services, investment and standards. However, an FTA usually does not remove the partner's other domestic rules, such as climate charges or product standards.