EU Offers Concessions on Carbon Tax, Sustainability Rules to US
India may seek the same relief in its EU trade talks
Chennai: Raising hopes for India, the European Union has agreed to provide concessions on the Carbon Tax and the sustainability rules to the US under the framework trade agreement. India, which is pursuing a trade deal with the EU, can press for these concessions.
After agreeing on a framework trade agreement on July 27, the US and European Union unveiled the details of the deal on Thursday.
Besides accepting the demand to buy $750 billion worth of energy products and make $600 billion investments in the US, the European Union also provides concessions to the US on European regulatory frameworks like the Carbon Border Adjustment Mechanism (CBAM), which will start collecting taxes from January 1, 2026, and Corporate Sustainability Rules requirements taking effect from July 2027.
“Taking note of the US concerns related to treatment of US small and medium-sized businesses under the Carbon Border Adjustment Mechanism (CBAM), the European Commission, in addition to the recently agreed increase of the de minimis exception, commits to work to provide additional flexibilities in the CBAM implementation,” the agreement said.
Further, the EU committed to undertake efforts to ensure that the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD) do not pose undue restrictions on transatlantic trade.
In the context of CSDDD, this includes undertaking efforts to reduce administrative burden on businesses, including small- and medium-sized enterprises, and to propose changes to the requirement for a harmonised civil liability regime for due diligence failures and to climate-transition-related obligations.
The European Union also made commitments to work to address US concerns regarding the imposition of CSDDD requirements on companies of non-EU countries with relevant high-quality regulations.
“For India, which is in the advanced stages of negotiating its own free trade agreement with the EU, these developments carry clear lessons. New Delhi should push for similar carve-outs and flexibilities in CBAM and sustainability rules, especially to shield Indian SMEs and exporters from disproportionate costs. Without this, Indian exporters may find themselves facing steep compliance costs even as U.S. competitors enjoy preferential treatment,” said GTRI.
