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CBAM’s Impact on Renewable Energy Adoption in Indian Industries

In an  interview with Shailendra Singh Rao, Founder of Creduce and BW Sustainability World, he delved into navigating international climate regulations such as CBAM, the potential impact on renewable energy adoption in India, and strategies for maintaining competitiveness amidst regulatory changes.

1) How does your organization, CREDUCE, navigate international climate regulations such as CBAM and other border adjustment mechanisms to ensure continued success in carbon credit origination and aggregation?


Although Creduce is yet to adopt a more aggressive approach to acquiring carbon credits from international projects, our current priorities are on establishing robust certification and verification procedures for carbon credits, which are essential for proving compliance.

Sources of carbon credits from geographically diverse projects can help mitigate the risk of region-specific market fluctuations, especially when the market for carbon credits is so volatile.

In addition to fostering collaborations with project developers in countries that have adopted CBAM, Creduce can gain significant insights and guarantee adherence to regulatory requirements. It is critical to closely monitor the development and implementation of CBAM and other border adjustment mechanisms in order to remain competitive and adapt.


2) Can you elaborate on the potential impact of CBAM on the adoption of renewable energy technologies and the development of carbon-neutral initiatives within India’s industrial sectors?

This might have dual implications for India.

This could, on the one hand, encourage Indian firms to invest in cleaner technologies, such as renewable energy sources and energy efficiency measures, particularly those that export to the European Union. Increased utilisation of solar, wind, and other renewable energy sources to power industrial processes would ensue as a consequence of this.

Nevertheless, the adoption of cleaner technologies could necessitate initial capital outlays, which could potentially strain the immediate financial viability of certain sectors. Certain organisations may exhibit resistance towards the initial investments required to implement novel technologies.

India’s industries can increase their global market competitiveness, particularly vis-à-vis environmentally conscious nations that prioritise sustainability, by embracing cleaner technologies and mitigating their carbon emissions. It may result in the loss of employment in conventional, carbon-intensive industries.

The answer is contingent upon the carbon pricing framework and the goods it encompasses. Government policies may also have a significant impact. India stands to gain from a limited number of measures, including providing subsidies or tax breaks to encourage investments in renewable energy and the adoption of clean technologies, funding programmes that train workers in new skills pertinent to clean technologies, and establishing a resilient clean energy infrastructure, such as a dependable grid network for the integration of renewable energy.


3) How do you perceive India’s current stance on the EU’s Carbon Border Adjustment Mechanism (CBAM) and its potential impact on Indian exporters?

Regarding the Carbon Border Adjustment Mechanism (CBAM) of the European Union, India maintains a cautious stance.

Carbon pricing is essentially what CBAM does to imported goods. This has the potential to substantially escalate the expenses encountered by Indian exporters, specifically in industries characterised by substantial carbon emissions, such as steel, aluminium, cement, and fertilisers. This may reduce the competitiveness of Indian exports on the EU market.

Developing countries on the path to economic growth are unjustly burdened by CBAM, whereas developed nations, which have a greater historical carbon footprint, are exempt from comparable scrutiny. India is concerned that CBAM could be sanitised as a trade barrier, impeding lawful exports and affecting its economic growth.

The three most detrimental consequences for Indian exporters would be increased export prices, diminished demand, and market share loss. Overall, CBAM presents Indian exporters with a significant obstacle. Nevertheless, this may serve as a catalyst for India to swiften its progression towards an industrial sector that is both environmentally friendly and sustainable.

4) In your view, what strategies or measures could India adopt to maintain its competitive edge while adhering to international climate regulations such as CBAM?

For industries to be powered by solar, wind, and other clean energy sources, India must make substantial investments to reduce carbon emissions and production costs. In order to establish itself as a frontrunner in sustainable production, it is imperative that it additionally provide backing for research and development initiatives pertaining to cleaner manufacturing processes and low-carbon technologies. Furthermore, to alleviate the financial burden on industries, it is critical that governments provide subsidies and tax breaks to encourage investments in renewable energy and the adoption of clean technologies. Training employees in new skills pertinent to clean technologies must consume a significant portion of effort in order to prevent job losses and guarantee a seamless transition. Additionally, collaborate with nations that have adopted CBAM in order to comprehend regulations and create compliant production methods.

Finally, it would not be inappropriate for Indian exporters to broaden their range of export markets by concentrating on countries that lack comparable carbon pricing mechanisms.


5) Could you discuss the role of carbon taxation and border adjustment mechanisms like CBAM in expediting the transition towards a low-carbon economy?

Carbon taxes and CBAMs can contribute to a low-carbon transition in a dual-pronged fashion. Increase the cost of carbon to deter the use of fossil fuels. Utilising polluting options

incurs greater expenses for the companies, which encourages them to transition to cleaner alternatives such as renewable energy.

In addition, CBAMs prevent producers in regions with lax environmental regulations from exploiting those with more stringent policies. This results in a more equitable market wherein clean practices are incentivized.

Both policies expedite the transition to a low-carbon economy by compelling businesses to reduce their carbon footprints.

6) Considering the alignment of Indian taxonomy with global standards, especially in sectors like hydrogen, fertilizer, and steel, do you anticipate any effects on India’s international market position and its ability to attract foreign investment?

If India’s taxonomy is in line with global standards for industries like steel, hydrogen, and fertiliser, it could help India’s position in the international market and attract foreign investment.

These sectors might have a better idea of what “green” really means if they work together. This openness can help build trust with foreign investors looking for green investments. Standardised taxonomies are often used by international investors to figure out how something affects the environment. Indian projects can get green financing and investment funds that focus on sustainability more easily thanks to alignment.

Indian goods might be more welcome in foreign markets with similar taxonomies if they can be proven to be “green” by the same standards. This might make India more competitive.

But to meet stricter standards, Indian companies might have to spend more up front on cleaner technologies, which could hurt their short-term profits.

Overall, an Indian taxonomy that is well-thought-out and in line with global standards can help India become a credible player in the green market. This will help India get more foreign investment and improve its position in these areas on the international market.

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