How to turn overseas green regulation into export advantage, Pg17

Key Highlights:

• India initially resisted overseas green trade regulations like the EU's Carbon Border Adjustment Mechanism (CBAM), viewing them as protectionist.
• A new approach suggests leveraging these regulations to finance India's green industrialization and gain export advantage.
• India aims for net-zero by 2070 and can use global green rules to establish lower-carbon industries from the outset.
• Opportunities exist in exporting green ammonia, Sustainable Aviation Fuel (SAF), cleaner steel, aluminum, and electrical equipment.
• India can build Digital Public Infrastructure (DPI) for carbon accounting and traceability to lower compliance costs.
• Redesigning India's carbon market with higher prices and sector-level targets is crucial for incentivizing decarbonization.

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Detailed Insights:

• The EU's Carbon Border Adjustment Mechanism (CBAM) is set to widen in scope, making green trade regulation a permanent feature.
• Cleaner technologies are capital-intensive, and regulated foreign markets can help finance their early costs for India.
• India has discovered some of the world's lowest prices for green ammonia, offering export potential to Europe, Japan, and Korea.
• Long-term export contracts for green ammonia can help finance early plants and build domestic industry.
• ReFuelEU Aviation regulation mandates a 2% Sustainable Aviation Fuel (SAF) blending requirement by 2025, creating export demand.
• Diverting ethanol from domestic petrol blending to produce higher-value SAF for export is a viable strategy.
• Rising carbon costs in Europe for primary steel create a price umbrella for India to finance cleaner production methods.
• Investments in recycled aluminum and smelters using clean power can provide an export advantage as indirect emissions are counted.
• The global market for electrical equipment is approximately $500 billion, where India currently holds less than 2% of exports.
• India's Digital Public Infrastructure (DPI) model can be adapted to create low-cost, interoperable systems for product-level carbon accounting.
• A carbon price of $30-50 per tonne is needed in India's carbon market to effectively change investment decisions in key sectors.
• Sector-level targets, rather than plant-specific ones, are recommended for India's carbon market to incentivize overall decarbonization.
• India should continue to contest protectionism and seek technology and finance from rich countries.

Key Concepts Involved:

• Carbon Border Adjustment Mechanism (CBAM): An EU policy imposing a carbon price on imported goods to prevent carbon leakage.
• Net-zero emissions: Achieving an overall balance between greenhouse gas emissions produced and greenhouse gas emissions removed from the atmosphere.
• Green industrialization: The process of developing and expanding industries that produce goods and services with minimal environmental impact.
• Sustainable Aviation Fuel (SAF): Biofuel used to power aircraft that has a smaller carbon footprint than traditional jet fuel.
• Digital Public Infrastructure (DPI): Open, interoperable digital systems that enable essential public and private services at scale.