A news analysis by the Indian-based Centre for Science and Environment and Down To Earth Magazine, revealed that developed countries around the world are abandoning free trade in the name of climate change.

According to the analysis, the United States and the European Union are leading this trend toward protectionism, armed with massive subsidiaries and tariffs, and this may change the global trade system.

AvantikaGoswami, author of the Down To Earth report and CSE's programme manager for climate change, said, in the race to build low-carbon economies, countries are introducing policies to accelerate the transition from fossil fuels, promote manufacturing of clean-energy technologies, and decarbonise industries.

https://www.myjoyonline.com/climate-change-will-increase-gap-between-rich-and-poor-if-not-addressed-environmentalist/

“In the race to build low-carbon economies, countries are introducing policies to speed up the transition from fossil fuels, promote manufacturing of clean-energy technologies and decarbonise industries."

According to him, the race appears to be part of a global effort to reduce greenhouse gas emissions. However, countries have sparked fears of trade wars as governments try to restore green industries and dominate the global supply chain of goods and technologies required to avert a climate catastrophe under the guise of climate action.

https://www.myjoyonline.com/financial-investments-and-resources-are-needed-to-address-climate-change-advocate/

According to CSE, the US passed the Inflation Reduction Act (IRA) in August 2022, which provides approximately $370 billion in subsidies, primarily through tax credits, over a 10-year period for renewable energy, electric vehicles, energy-efficient appliances, carbon capture and storage, and clean hydrogen.

It stated that this has irritated other green technology manufacturing powers such as the EU, South Korea, and Japan, who are concerned that their companies will jump ship and expand.

This has enraged other green technology manufacturing powers such as the EU, South Korea, and Japan, which are concerned that their companies will abandon ship and expand operations in North America.

According to Goswami, “Developing countries like India cannot match the IRA’s scale of subsidies. If we take the example of electric vehicles (EVs) in our country, there are three incentive schemes that are offered – the Faster Adoption and Manufacturing of Electric Vehicles (FAME II) with an outlay of Rs10,000 crore; and two Production-Linked Incentive (PLI) schemes of Rs25,398 crore (automotive sector including EVs) and Rs18,100 crore (battery storage), respectively.”

Goswami added that there is also the question of access to critical minerals. Prices of minerals in the global market are set by the big players.

"China is the biggest buyer today. Once the US enters this race for its own domestic manufacturing on a large scale, India will have to aggressively scale up its EV production to command prices on its own terms."

According to CSE experts, India should focus on EV sectors where it has a ready domestic market, such as two-wheelers and three-wheelers, which account for 63% and 34% of the domestic EV market, respectively.

"It can also become a hub for recycling of spent batteries, which will enable it to recover the processed critical minerals that it is currently lacking."

According to CSE, the EU reached a provisional agreement on a Carbon Border Adjustment Mechanism (CBAM) in December 2022, which is a tax on imports of goods such as steel and aluminum from countries with lax emission reduction rules. The CBAM has been criticised by BRICS countries, and India's finance minis­ter has warned the coun­try's firms to reset themselves and be ready for "tariff walls coming up newly in the name of climate change".

https://www.myjoyonline.com/we-need-to-bring-climate-change-reporting-to-the-front-burner-penplusbytes/

According to UNCTAD (United Nations Conference on Trade and Development), a CBAM will reduce global carbon emissions by no more than 0.1 percent if applied at US $44 per tonne – but it will have an adverse distributional impact because it will reduce global real income by US $3.4 billion, with developed countries' incomes suffering the most.

According to UNCTAD, a CBAM will reduce global carbon emissions by no more than 0.1 percent if applied at US $44 per tonne – but it will have an adverse distributional impact because it will reduce global real income by US $3.4 billion, with developed countries' incomes rising by $2.5 billion while developing countries' incomes fall by $5.9 billion. Other developed countries, such as the United Kingdom, may follow suit and impose a carbon border tax.

When confronted with the CBAM, developing countries require access to finance and technology in order to decarbonize their manufacturing sector and maintain export competitiveness. The EU is India's third largest trading partner; according to the Down To Earth report, India's iron and steel, and aluminum sectors would be the most vulnerable to CBAM, albeit to a lesser extent than other countries.

India does not have a single domestic carbon price, but it does have an upcoming domestic carbon market, a national NDC and net zero target, and industrial firms' voluntary climate targets. It remains to be seen whether this patchwork of market-based schemes and climate signals will create a case for Indian industry to avoid the tariff burden imposed by CBAM, according to Goswami.