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It is apparent that through CBAM, the EU wants to intimidate non-EU nations into adopting its self-proclaimed position as climate leader.

Protectionism is a threat to the collaboration required between the developed and developing world in addressing climate issues. Innovative protectionist ideas, such as the European Union’s Carbon Border Adjustment Mechanism (EU-CBAM), the Corporate Sustainability Due Diligence Directive, and the EU Deforestation Regulation, have led to concerns in developing nations. India has criticised the EU-CBAM, in particular, as being “arbitrary”.

A ‘discriminatory’ tool

The CBAM is meant to ensure that imported products bear a carbon emission cost comparable to the cost imposed on goods produced within the EU. Exporters will be mandated to provide information on the quantity and emissions of their goods and buy certificates to match those emissions. The definite phase of the CBAM will enter into force on January 1, 2026. This may pose significant risks to India’s international trade. The EU comprises 20.33% of India’s total merchandise exports, of which 25.7% are affected by CBAM. During the last five fiscal years, iron and steel have accounted for 76.83% of these exports, followed by aluminium, cement, and fertilizers.

In recent editions of the Conference of the Parties (COPs), India has said that CBAM is “discriminatory” and called on developing countries to establish a coordinated response to what it considers as an unjust transfer of responsibilities. The CBAM is attracting considerable attention at COP29 in Baku. However, under-prepared arguments presented at COP29 could undermine India’s credibility as a leading voice of the Global South.

It is important to recognise that not all developing economies share the same economic aspirations as India, nor will they be equally affected by the impacts of climate change. Therefore, perceptions regarding CBAM are complex even within the developing world. Issues related to multilateral and bilateral trade and cultural ties between developed and developing economies influence the tone of their arguments. The current production-based accounting principle practiced under the United Nations Framework Convention on Climate Change (UNFCC) includes the emissions resulting from the production of exportable commodities within the emission inventory of the exporting nation. The exporting nation is held accountable for the reduction of these emissions, even though these products are not consumed within its domestic market. As a result, many developing economies with less stringent emission reduction measures are accused of climate change when they export more.

The proposed arguments

Therefore, India’s arguments should also align with other developing countries’ agenda, if India wishes to speak like a leader. The following could be some of the arguments. First, on the time for preparing for CBAM. With administrative deftness, the EU set a target to reduce greenhouse gas (GHG) emissions by 20% compared to 1990 levels by 2020; this is outlined in the EU Climate Action and Renewable Energy Package in 2008. Following the accomplishment of these targets, the European Green Deal was unveiled in 2019, extending the emission reduction target to 55% below the 1990 levels in a Fit for 55 Package. Does the CBAM offer developing economies a matchable time to adapt?

The second is on empowerment. The EU has decided to keep the revenues generated from the CBAM as its resources, which will be used to fund the NextGenerationEU recovery tool and operate the CBAM. Depending on the mechanism’s ultimate design, the anticipated additional money generated by CBAM for 2030 is estimated to be €5 to €14 billion annually. Is it appropriate for the EU not to share this revenue with non-EU trading partners? Doing so may contribute to capacity building and technology transfer in developing economies.

Third, there is the issue of quantifying emission reduction responsibilities. India can justifiably advocate for an alternative called Equity-based Accounting (EBA) of Nationally Determined Contributions, which emphasises a collective obligation for emission reductions among trade partners based on the ideas of horizontal intra-generational equity and vertical inter-generational equity. In the context of the EU-CBAM, India can introduce the concept of EBA to the developing world concerning retaliation measures. Using the EBA, a formula can be proposed to calculate the tariff base on imports from the EU, which considers factors such as relative per capita GDP, relative per capita emissions, relative gains from trade, and relative avoided emissions through trade. By expressing the actual emissions embedded in imports in a way that reflects the developmental and historical heterogeneities between trade partners, any developing economy can be better positioned under these new rules of the game, which provide an unbiased evaluation of climate initiatives.

Even the PBA adheres to the principle of Common but Differentiated Responsibilities and Respective Capabilities, which is significantly compromised under the CBAM framework. CBAM does not acknowledge compensatory justice or distributive justice. Consequently, the allocation of emission responsibilities is not equitably assigned to countries based on their historical contributions to climate change or their capacity to mitigate its effects. It is apparent that through CBAM, the EU wants to intimidate non-EU nations into adopting its self-proclaimed position as climate leader.

Suvajit Banerjee, Fellow at NCAER, New Delhi. Views are personal; Sovini Mondal, Research Associate at NCAER, New Delhi. Views are personal

Kavach is modelled on the European train control system. In Europe, it is also used as a signalling system, a necessity in the European railways given the high cost of labour in the EU.

The spate of train accidents has brought into focus the anti-collision system, Kavach. This year’s railway budget identified safety as a priority. For 2024-25, a sum of Rs 1,112.57 crore — a 50% increase from the interim budget — had been allocated to instal Kavach. However, in a written response in July, the railways ministry clarified that Kavach has been deployed on only 1,465 kilometres in the South Central Railway — close to 2% of the total 68,426 km network. According to its estimate, at least Rs 45,000 crore will be required to equip all railway routes with Kavach. Going by the budgeted amount, it will take years for Kavach to be rolled out across the entire railway network. Does the railways have the capacity to roll out the system in a time-bound manner?

Kavach is modelled on the European train control system. In Europe, it is also used as a signalling system, a necessity in the European railways given the high cost of labour in the European Union. Kavach has five main elements, including the laying out of optical fibre throughout a route, which implies the installation of telecom towers at every 4-5 km with a data centre at every station. The signals between two stations are integrated into the data centre along with electronic interlocking. The track is also fitted with radio-frequency identification devices while another device is fitted above each loco. For all these reasons, Kavach is a complex project requiring massive work in terms of money, time and labour.

There do exist alternative systems that can be installed at a faster pace.

Consider the computer-assisted anti-collision device in automobiles. Most anti-collision system technologies use cameras for image recognition and either a radar or a laser to detect the proximity of other objects. They may also include a GPS sensor to detect fixed objects that a driver might not see. Most devices are fitted only in automobiles, unlike Kavach where one needs to instal other devices along an entire railway route apart from fitting the device in the engine.

In the case of airlines, surveillance radar helps aircraft monitor whether there are other aircraft in the vicinity. A computer analysis determines which aircraft represents potential collision threats. But trains confront a set of specific challenges in this respect: the manoeuvring possibilities are considerably reduced and, thus, the reaction options are mainly limited to applying the brakes of the train. The potential speed of the trains, combined with the reduced reaction capabilities and the geographical proximity between adjacent rails, leads to a high accuracy requirement on position determination.

In this context, a system developed by The German Aerospace Center offers an interesting alternative. With the Railway Collision Avoidance System, there is no need for any line equipment — the trains communicate directly with each other and there is a warning alert in the unlikely case of a possible collision. Central to this system is the regular exchange of relevant information about position, direction of travel, and speed via train-to-train radio communication without a base station. All leading rail vehicles — locomotives, motorcars and, possibly, control cars — are equipped with a vehicle unit. This comprises a positioning and a communication component. The latter sends its own driving parameters continually via radio directly to all trains in the immediate vicinity and receives this information from other vehicle units at the same time. It can identify situations of potential conflict by comparing its own data with those of the received data.

The investment necessary for this system is cheap compared to other rail anti-collision systems. Moreover, as it involves installing devices only in the loco car/engine, it can be implemented in a time-bound manner compared to Kavach that requires the laying of optical fibre and the building of data centres all along the route. 

Sanjib Pohit is a professor at NCAER. Views are personal.

Excessive caregiving burden leaves women with fewer hours to engage in paid work. A well-designed framework for flexible part-time employment contracts could offer valuable work opportunities.

As the European Union (EU) sets a commendable example by effectively reducing its CO2-equivalent emissions, the emissions from non-EU countries with less rigorous climate obligations are accused of undermining the EU’s climate objectives. Consequently, mainstream Western media portrays the Carbon Border Adjustment Mechanism (EU-CBAM) as a fair pricing strategy for carbon emissions, thereby positioning the EU as a leader in promoting cleaner production practices in non-EU nations. On the other hand, voices from the Global South incriminate the EU-CBAM as an innovative protectionist instrument, that has crooked the chronic North-South divide in addressing climate obligations, often overshadowing the precautionary, prudent, and pragmatic approaches that developing economies like India advocate for. Around this disputation, the CBAM has successively occupied the centre-stage of discussion in some recent editions of the Conference of the Parties (COP) organized under the UN Framework Convention on Climate Change (UNFCCC).

During COP28, held in Dubai in 2023, representatives from developing economies expressed their concerns regarding the CBAM, highlighting evidence that its economic implications for Africa could be three times the level of aid provided by the EU to the continent. At COP27, convened in Sharm El-Sheikh, Egypt, a statement from Brazil, South Africa, India, and China, collectively known as the BASIC countries, described the CBAM as discriminatory and urged developing nations to present a unified response to what they perceive as an unjust transfer of responsibilities.

The CBAM is scheduled for implementation in its definitive form beginning 1 January 2026. This mechanism is a crucial component of the EU’s climate strategy and may present significant risks to international trade in energy-intensive and trade-exposed products. Therefore, consistent with previous COPs, the CBAM is expected to garner substantial attention from stakeholders involved in the ongoing negotiations at COP29, currently taking place in Baku, Azerbaijan, since 11 November 2024. Discussions will likely feature arguments both supporting and opposing its eventual implementation and rollout.

The EU comprises 20.33% of India’s total merchandise exports, with 25.7% of these exports impacted by the CBAM, valued at $8.7 billion. Of this total, iron and steel alone account for a significant 76.9%, followed by aluminium at 19.4%, cement at 3.7%, and fertilizers at 0.02%, based on data from the past three fiscal years. Therefore, India must revitalize the CBAM discussion at the COP29 platform and beyond concerning the equitable allocation of emission reduction responsibilities among international trade partners. This approach is vital not only for ensuring fairness but also for recognizing the important role that international trade plays in shaping the national emission inventory.

India has already undergone rounds of consultations with experts to develop strategic arguments aimed at pitching the voice as a representative for the Global South and countering the imposition of the CBAM. In this policy context, India is also exploring the possibility of implementing retaliatory tariffs on imports from the EU. However, it is important to note that poorly executed retaliatory measures may generate negative perceptions of India on the international platform, potentially conflicting with the EU’s laudable initiative to protect the climate. Consequently, an intriguing question arises: Can India effectively pursue retaliatory measures rooted in climate protection against developed nations, while simultaneously encouraging other developing countries to adopt similar approaches?

The prevailing practice of production-based accounting (PBA) for nationally determined contributions (NDCs) aimed at reducing carbon emissions assigns the responsibility for the emission content of traded goods to exporters. This methodology inadvertently results in the stigmatization of India and several other developing economies within the context of climate negotiations with the European Union (EU). Nonetheless, recent empirical research has identified opportunities for the implementation of alternative principles in national emission accounting.

India has the potential to effectively execute a retaliatory CBAM directed at the EU, based on one of these alternative accounting principles. A notable approach is Equity-based Accounting (EBA), which promotes a mutual obligation for emission reductions among trading partners. The EBA delineates the principles of intra-generational horizontal equity among economies engaged in trade, particularly concerning the allocation of responsibilities for emission reduction. This allocation is determined by each country’s capacity to mitigate climate change impacts related to trade and the benefits derived from international trade. In the context of a trade relationship between India and the EU, it is imperative that both parties collaboratively assume their respective responsibilities for reducing emissions generated from both production and consumption activities linked to their trade interactions. Furthermore, the EBA integrates the principle of horizontal equity with inter-generational vertical equity, which assigns a greater burden to those countries with a more substantial historical contribution to climate change. Specifically, in the India-EU scenario, this methodological framework suggests that the EU bears a greater proportional responsibility for emission reduction compared to India.

In the context of the EU-CBAM framework, the determination of retaliatory tariffs should be based on an adjustment of the emissions embedded in India’s imported commodities from the EU. This adjustment would employ an inflator derived from the EBA, thereby ensuring that importers fulfil the obligations established by the EU. The tariff base may be calculated through the application of validated inflators found in the trade-environmental literature (Banerjee et al., 2021). This calculation involves multiplying the actual emissions present in imports by a complex ratio that incorporates several relative factors, such as per capita GDP, per capita emissions, benefits from trade, avoided emissions through trade, etc. Additionally, the inflator may be further extended to encompass other relative attributes of the EU in comparison to India. This would facilitate a more nuanced conversion of the actual emissions embedded in imports, allowing for an accurate representation of the developmental disparities between trading partners within the framework of shared responsibility. Through these measures, India can position itself to propose innovative rules that offer a fair evaluation of international climate initiatives. This approach will enable India to advocate for the EBA as a standardized method for delineating the allocation of emission responsibilities among nations.

Suvajit Banerjee is a Fellow and Sovini Mondal is a Research Associate at National Council of Applied Economic Research (NCAER), New Delhi. Views are personal.

The 2024-25 Union Budget, with its allocation of substantial resources tonatural farming, marks a pivotal moment, but much needs to be done

Natural farming, with its emphasis on biodiversity, soil health, and reduced chemical inputs, is gaining traction across India’s agricultural landscape. Andhra Pradesh, Gujarat and Himachal Pradesh have emerged as testing grounds for this promising method, showcasing unique models that focus on sustainable agriculture. The 2024-25 Union Budget, with its allocation of substantial resources to natural farming, marks a pivotal moment. However, as we push toward a low-carbon agricultural future, there are still some pertinent questions to be answered. Will natural farming transform Indian agriculture? Or will it remain an ambitious but niche endeavour? 

Successes and challenges in some States

In Himachal Pradesh, the State’s Prakritik Kheti Khushhal Kisan Yojana (PK3Y) has been an important driver of change. Farmers receive ₹33,000 to buy indigenous cows and an additional ₹8,000 to improve cowshed conditions, helping to promote the use of ‘Jeevamrit’ and ‘Beejamrit’, which are bio-fertilizers made from cow dung and urine. These practices are helping 6,438 farmers in districts such as Bilaspur adopt natural farming. Maize grown naturally is being purchased at a support price of ₹3,000 a quintal.

In Gujarat, the ‘Aapnu Dang Prakrutik Dang’ initiative, which declared Dang district as fully natural farming-based in 2021, exemplifies the State’s focus on mechanisation and financial assistance. Farmers receive ₹900 a month for maintaining one indigenous cow and a 75% subsidy for purchasing natural farming kits to prepare ‘Jeevamrit’. Additionally, the Gujarat Natural Farming Science University, established in 2017, has strengthened research in sustainable farming practices. These efforts have helped train over 9,000farmers in 285 cluster-based programmes.

Andhra Pradesh stands out with its Andhra Pradesh Community-Managed Natural Farming (APCNF) initiative, which has become a global model. With 1.03 million farmers practising natural farming over 1.2 million acres, the State has implemented practices such as Pre-Monsoon Dry Sowing (PMDS), which enhances soil fertility and reduces water use by relying on early monsoon rains. The State’s goal is to convert all six million farmers and eight million hectares to natural farming by 2027.

These examples highlight the diversity of India’s agricultural landscape and the potential for region-specific solutions. Yet, the question remains whether these models can be scaled nationally. Each region’s successes is tied to localised initiatives, and replicating these on a larger scale presents significant challenges.

Focus point in the 2024 Budget

The 2024-25 Union Budget took a bold step by cutting fertilizer subsidies and focusing on natural farming as a cornerstone of India’s low-carbon agricultural transition. One of the most ambitious initiatives is the establishment of 10,000 bio-input resource centres (BRCs). These centres will be essential for distributing bio-fertilizers such as ‘Jeevamrit’and ‘Beejamrit’, as well as neem-derived natural pesticides. By reducing the reliance on chemical inputs, the BRCs aim to support the government’s commitment to bringing one crore farmers into natural farming by 2025.

However, logistical challenges may undermine this ambitious plan. The experience of Chhattisgarh’s Godhan Nyay Yojana, where inconsistent supply chains for cow dung hampered progress, is a cautionary tale. The success of the BRCs will depend on the ability to source and distribute bio-inputs reliably, especially in regions where livestock ownership is low. This problem is especially pronounced in Andhra Pradesh, where the shortage of Indigenous cows makes sourcing dung and urine more difficult for some farmers.

Moreover, while bio-inputs can replace chemical fertilizers, they are often labor-intensive to produce and apply. Natural farming’s reliance on manual work —particularly in the preparation and application of bio-inputs — can be a deterrent. In Gujarat’s Dang district, mechanisation has helped ease this burden, but many small holders across India lack access to such tools.

Although the Budget’s focus on branding and certification for natural products is commendable, the ability of farmers to access premium markets remains uncertain. Certification is crucial for helping farmers fetch better prices, but the scale and the pace of this transition are slow. Can India’s agricultural system effectively support millions of farmers in making this leap, financially and logistically?

 The issue of mainstreaming

One of the most significant barriers to scaling natural farming is labour. Unlike conventional farming, which relies heavily on chemical inputs, natural farming often requires more manual intervention. Farmers must prepare bio-inputs such as ‘Jeevamrit’and ‘Beejamrit’ and apply them frequently. The process of producing these bio-fertilizers at home is not only labour-intensive but also depends on the availability of livestock. Without mechanisation or technological support, many farmers will find it difficult to transition to natural methods.

Input supply is another critical issue. As seen in Chhattisgarh’s Godhan Nyay Yojana, the availability of cow dung and urine, the core ingredients for bio-fertilizers, is inconsistent. The success of the 10,000 BRCs depends on building a reliable supply chain for these materials. In regions where livestock numbers are low, such as parts of Andhra Pradesh, alternative sources of bio-inputs must be developed. If these supply chains falter, farmers may revert to chemical inputs, thus undermining the entire initiative.

Finally, market dynamics remain a challenge. While natural farming products can command higher prices, most farmers struggle to access premium markets. Only a

fraction of India’s agricultural output is certified as organic or natural, and the competition, with cheaper, chemically grown crops, is fierce. The Union Budget’s push for certification and branding is a step in the right direction, but will these measures be enough to sustain farmers during the costly transition away from chemical farming?

Natural farming has the potential to transform Indian agriculture, but its future hinges on addressing several critical challenges. Strengthening bio-input supply chains, mechanising labor-intensive processes, and improving market access are all essential. Will the BRCs be able to meet the demands of millions of farmers, or will supply chain disruptions limit their impact? Can India create a robust market for natural products that benefits farmers and consumers?

The Union Budget has laid a promising foundation, but much remains to be done to ensure the long-term success of natural farming. Can this ambitious vision of a chemical-free agricultural future become a reality for millions of smallholder farmers across India? Or will natural farming remain a niche practice in select regions?

 Laxmi Joshi is with the National Council of Applied Economic Research (NCAER), New Delhi. Souryabrata Mohapatra is with the National Council of Applied Economic Research (NCAER), New Delhi. The views expressed are personal