India should consider including some local taxes as part of its emissions calculations. Tata Steel chief executive and managing director TV Narendran said this would allow businesses to claim “credits” for such carbon tax-type payments made here under the European Union’s (EU) proposed Carbon Border Adjustment Mechanism (CBAM).explain.
The Indian government also needs clear financial and policy support to shift manufacturing processes to green steel, in a way similar to what the European Union has done before, he said.
“In the short term, we incur a lot of costs, the tax we pay is not called a carbon tax here. But it is like a carbon tax (according to global market norms). So (we need to) look and organize ourselves better . because CBAM also allows you to credit the carbon tax you pay in the domestic market,” Narendran said career line during the interview.
“I think we have an opportunity to make better use of the situation in India, which is probably a more reasonable avenue than expecting Europe to say there will be no CBAM,” he added.
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The CBAM regulation entered into force the day after it was published in the Official Journal of the European Union on May 16. The mechanism (reporting standards) will enter a transition phase on October 1, with the first reporting period for importers ending on January 31, 2024. It will initially apply to imports of certain commodities and selected precursors for the production of carbon-intensive products, including steel.
In general, aluminum and steel, two export products, will come under pressure once carbon tax rules are implemented in Europe, one of the main overseas markets. At a recent high-level meeting, two key ministries (Mines and Steel) were asked to discuss CBAM with stakeholders and transition to carbon reporting standards based on this new approach.
India’s emissions intensity is 2.55 tonnes of CO2 per tonne of crude steel produced; compared to a global average of 1.85.
Need for Policy Intervention
Narendran said there was also a “need for policies” in India to incentivize the transition to green steel production. The transition “is not easy” and “costs a lot of money”. At the same time, customers, including governments, also need to be educated to pay higher fees after the switch occurs.
While pointing out some practical issues, the managing director of Tata Steel said that green steel requires the use of raw materials such as steel scrap, which are much more costly; meanwhile, the availability of natural gas in some parts of the country remains a concern, An example is the eastern region, where most steel plants are located. For example, Tata Steel’s Dutch plant emits 1.8 tonnes of carbon per tonne of steel produced (because it depends on scrap), while Tata Steel’s Jamshedpur plant emits 2.11 tonnes of carbon.
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“We also don’t have gas supply in eastern India, where major steel capacity is being built. We need to ensure infrastructure is built so that eastern India can get enough gas at a reasonable price so that steel companies can invest in gas plants and ultimately Hydrogen,” he said.
He pointed out that if India wants to continue to participate in the “global market”, it cannot remain isolated. Policies developed in Europe a few years ago, such as carbon pricing mechanisms, can provide some guidance on the way forward.
By the way, India is also considering setting up its own carbon trading system
“I don’t think India needs to reinvent the wheel. Look at what Europe has done…have a policy that has both a stick and a carrot. Also, if you look at European governments, you will find that they Transformation is being supported. They are supporting capex and opex. We (India) are some distance away from that,” he said.