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Context: Pennsylvania becomes the first major fossil fuel-producing state in the US to adopt a carbon pricing policy to address climate change.

• It joins 11 states where coal, oil and natural gas power plants must buy credits for every ton of carbon dioxide they emit.
• Canada imposes fuel charges on individuals and also makes big polluters pay for emissions. It’s one of 27 nations with some kind of carbon tax. Canada’s carbon taxes include a minimum fuel charge for individual’s equivalent to about $40 per ton.

Provisions in India:

• India, the world’s third-largest emitter of greenhouse gases, is among the few countries in the world to have introduced a carbon tax.
• India has the world’s fourth-largest reserves and is the second-largest producer of coal.
• The government created the National Clean Energy Fund (NCEF) with contributions from the clean energy cess imposed on coal mined in India or imported.
• The cess, which came into effect in July 2010, was initially ₹50 per tonne in 2010 and reached ₹400 in 2016. However, with the goods and services tax (GST) coming into effect in July 2017, the clean energy cess was subsumed by the GST compensation cess.
• In Glasgow, India promised to bring down the country’s total projected carbon emission by 1 billion tonnes by 2030, reduce carbon intensity by 45% by the end of the decade from 2005 levels and achieve net-zero carbon emissions by 2070.
• The commitment also includes meeting 50% of India’s energy requirements from renewable energy by 2030 and increasing non-fossil fuel power generation capacity to 500GW by the end of the decade.
• The Union budget announced a scheme, named Roadmap for Sustainable and Holistic Approach through National Energy Efficiency, or ROSHNEE, to help cut the country’s carbon emissions.

Carbon border tax

• A carbon border tax is a tax on carbon emissions attributed to imported goods that have not been carbon-taxed at source.
• The carbon border tax proposal is part of the European Commission’s European Green Deal that endeavors to make Europe the first climate-neutral continent by 2050.
• A national carbon tax is a fee that a government imposes on any company within the country that burns fossil fuels.
• However, this often results in an increase of electricity costs in households and industry, which may lead to local business closures and other economic hardships for businesses and citizens.
• In contrast, a carbon border tax is able to protect a country’s local manufacturers, motivating them to adhere to green regulations.
• Many EU companies are at a cost disadvantage as they have been paying a carbon border tax and for carbon emissions since 2005 under the EU’s Emissions Trading System.
• The new carbon border tax can therefore lead to a more level playing field against importers, especially those from nations with more lax environmental standards.
• The border tax would not take effect until 2026.

How does this impact India?

• As India's third largest trading partner, the EU accounted for $74.5 billion worth of trade in goods in 2020, or 11.1% of India's total global trade.India's exports to the EU were worth $41.36 billion in 2020-21, as per data from the commerce ministry.
• By increasing the prices of Indian-made goods in the EU, this tax would make Indian goods less attractive for buyers and could shrink demand.
• The tax would create serious near-term challenges for companies with a large greenhouse gas footprint--and a new source of disruption to a global trading system already roiled by tariff wars, renegotiated treaties, and rising protectionism.
• A levy of $30 per metric ton of CO2 emissions could reduce the profit pool for foreign producers by about 20%if the price for crude oil remained at $30-40 per barrel.

https://indianexpress.com/article/explained/explained-can-climate-change-be-solved-by-pricing-carbon-7884733/

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