UPSC Key-26th July, 2025-India-Maldives, Renewable energy, and CBAM

Syllabus:

Preliminary Examination: Current events of national and international importance

Mains Examination: General Studies-II: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests

What’s the ongoing story: India is proud to be the most trusted friend of the Maldives, Prime Minister Narendra Modi said Friday after announcing a Rs 4,850-crore line of credit to the island nation.

Key Points to Ponder:

• Know the historical background of the India-Maldives relationship?

• What are the challenges seen between the nations in recent years?

• What is India’s ‘Neighbourhood First’ policy?

• How significant is the Maldives for India?

• What are the areas of cooperation between India and the Maldives?

• What are the major agreements signed during this visit?

• What is the “India-out” campaign? How did it affect the India-Maldives relationship?

• What are SAGAR and MAHASAGAR?

• Map work: Location of Maldives and surrounding islands

Key Takeaways:

• “Peace, stability, and prosperity in the Indian Ocean region are our shared goals. Together, through the Colombo Security Conclave, we will strengthen regional maritime security,” Modi said in his remarks after the two leaders held wide-ranging talks focusing on consolidating cooperation in areas of trade, defence and infrastructure.

• Besides FTA negotiations, Modi also announced that the two countries will work towards finalising a bilateral investment treaty. Later, addressing a media briefing, Foreign Secretary Vikram Misri said that both sides expect this FTA to be completed “fairly quickly”.

• The Maldives holds an important place in India’s ‘Neighbourhood First’ policy, Modi said, underlining that mutual cooperation in defence and security is a testament to the mutual trust. “India will always support the Maldives to strengthen its defence capabilities,” he said.

• In his remarks, President Muizzu — who had visited India in October last year, signifying a thaw in bilateral ties — said: “I am also pleased to announce the initiation of negotiations for a free trade agreement between India and the Maldives. This landmark initiative marks a significant step forward in strengthening our economic partnership.”

• He flagged India’s place as a “key source market” for tourism in Maldives, adding that the two countries have discussed starting direct flights towards this objective.

• Both countries exchanged four MoUs and three agreements in the presence of Modi and Muizzu. India handed over 3,300 social housing units in Hulhumale under India’s Buyers’ Credit facilities. Modi inaugurated a roads and drainage system project in Addu, and six high-impact community development projects.

• India will also provide 72 heavy vehicles to the Maldivian Ministry of Defence. Besides, there was an MoU on cooperation in fisheries and aquaculture, and one on sharing successful digital solutions implemented at population scale, as per officials in the Ministry of External Affairs.

• On Saturday, Modi will participate in the 60th Independence Day celebrations of the Maldives, as the Guest of Honour. On Friday, the two leaders also released a commemorative stamp to mark the 60th anniversary of the establishment of formal diplomatic relations.

Do You Know:

• Maldives’ proximity to the west coast of India (barely 70 nautical miles from Minicoy and 300 nautical miles from India’s West coast), and its location at the hub of commercial sea-lanes running through the Indian Ocean (particularly the 8° N and 1 ½° N channels) imbues it with significant strategic importance to India.

• Maldives is one of the key elements in India’s maritime security calculus. The security scenario in India’s periphery in the Indian Ocean is very much linked to the maritime strength of Maldives. This is the reason why India invests on Maldives’ security by training its defence forces.

• India’s Neighbourhood First Policy: According to Ministry of External Affairs, India’s ‘Neighbourhood First policy’ guides its approach towards the management of relations with countries in its immediate neighbourhood. the concept of the Neighbourhood First Policy came into being in 2008. It was conceived to bolster relations with certain priority countries such as Afghanistan, Bangladesh, Maldives, Myanmar, Nepal, Pakistan and Sri Lanka.

• SAGAR: The ‘Security and Growth for All in the Region’ (SAGAR) concept was first articulated by the Prime Minister in Mauritius in 2015. Under this concept, India envisages a free, open, inclusive, 4 peaceful, and prosperous Indo-Pacific region, one which is built on a rules-based international order, sustainable and transparent infrastructure investment, freedom of navigation and overflight, unimpeded lawful commerce, mutual respect for sovereignty, peaceful resolution of disputes, as well as equality of all nations.

• MAHASAGAR: This year, during Prime Minister Narendra Modi’s visit to Mauritius announced the upgradation of the comprehensive strategic partnership and enhanced SAGAR to MAHASAGAR, i.e. Mutual and Holistic Advancement for Security and Growth Across Regions.

Other Important Articles Covering the same topic:

📍Maldives, India, China: history shapes the present

📍Key takeaways from the India-Maldives vision document: health, education, start-ups, political exchanges

Previous year UPSC Mains Question Covering similar theme:

Discuss the geopolitical and geostrategic importance of Maldives for India with a focus on global trade and energy flows. Further also discuss how this relationship affects India’s maritime security and regional stability amidst international competition? (UPSC CSE 2024)

1 in 3 US smartphone imports now made in India, China’s lead shrinks

Syllabus:

Preliminary Examination: Economic and Social Development – Sustainable Development, Poverty, Inclusion, Demographics, Social Sector Initiatives, etc.

Mains Examination: General Studies-III: Indian Economy and issues relating to planning, mobilisation, of resources, growth, development and employment

What’s the ongoing story: India’s share in US smartphone imports surged to nearly 36 per cent in the first five months of 2025, from about 11 per cent in 2024. China, which continues to dominate the product category, saw its share drop from 82 per cent to 49 per cent over the same period.

Key Points to Ponder:

• What is the Production Linked Incentive (PLI)?

• How are PLIs transforming India’s manufacturing sector?

• What are the challenges of PLI?

• What are the other government initiatives to promote Make in India?

• How has it led to the increase in smartphone production in India?

• Why is India focused on an increase in India-manufactured goods in the electronics supply chain?

Key Takeaways:

• India’s growing share — now 1 in 3, driven largely by Apple iPhones — comes amid ongoing trade talks with the US. While smartphones are India’s top export to the US by value, President Donald Trump has threatened a 25 per cent tariff on Indian-made iPhones.

• Apple doubled down on production in India in 2020, after the government announced its flagship Production Linked Incentive (PLI) scheme to support smartphone manufacturing in the country. Through its contract manufacturers, the company has been the biggest beneficiary of the scheme, which has helped it move some production away from China.

• Apple’s pivot to India from China for US-bound exports has drawn criticism from Trump, who, in May, said he’s told Apple’s chief executive that he does not want the company to expand its manufacturing operations in India.

• However, Apple is unlikely to overhaul its India expansion plans in the near-term. In May, its contract manufacturer Foxconn informed the London Stock Exchange of a $1.49 billion investment in one of its India units, Yuzhan Technologies (India) Pvt Ltd. The new plant is expected to come up in Tamil Nadu, where Foxconn already has a major iPhone production base.

Do You Know:

• Since its launch in April 2020, the PLI scheme covers 14 sectors as of now. It has helped India achieve scale in manufacturing by attracting OEMs (original equipment manufacturers) as well as contract manufacturers in designated sectors. It has also contributed to limited value addition is segments such as surface mounting and PCB (printed circuit board) assembly, product testing, and packaging.

• Under its flagship production-linked incentive (PLI) scheme for smartphone manufacturing, the government has disbursed close to $1 billion in the three years from 2022-23 to 2024-25, with Foxconn, Tata Electronics and Pegatron, the three contract manufacturers of Apple receiving cumulatively over 75 per cent of the amount.

• The PLI for large scale electronics manufacturing, which was first announced in 2020 with an outlay of Rs 38,601 crore, offers incentives ranging from 4 to 6 per cent on net incremental sales of eligible products over the sales in the base year to the selected applicants.

• Make in India: Launched in 2014, the ‘Make in India’ initiative aims to facilitate investment, foster innovation, enhance skill development, protect intellectual property & build best in class manufacturing infrastructure.

Other Important Articles Covering the same topic:

📍PLI review 5 years on | On Govt table: PLI 2.0, what next to push manufacturing

📍The PLI push: $1 billion over 3 years to 19 firms, fuels record surge in handset exports

UPSC Prelims Question Covering similar theme:

(1) Consider the following statements: (UPSC CSE 2023)

Statement-I: India accounts for 3.2% of global export of goods.

Statement-II: Many local companies and some foreign companies operating in India have taken advantage of India’s ‘Production-linked Incentive’ scheme.

Which one of the following is correct in respect of the above statements?

(a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I

(b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I

(c) Statement-I is correct but Statement-II is incorrect

(d) Statement-I is incorrect but Statement-II is correct

UPSC Mains Question Covering similar theme:

“Success of ‘Make in India’ program depends on the success of the ‘Skill India’ programme and radical labour reforms.” Discuss with logical arguments. (UPSC CSE 2015)

EXPRESS NETWORK

Suicides on campus: Supreme Court issues 15 guidelines, calls for mental health policy

Syllabus:

Preliminary Examination: Current events of national and international importance

Mains Examination: General Studies-I: Salient features of Indian Society, Diversity of India.

What’s the ongoing story: Outlining the rise in suicides and mental health issues among students in educational institutions, the Supreme Court on Friday issued pan-India guidelines to combat the problem.

Key Points to Ponder:

• What is the Manodarpan initiative?

• What are the Ummeed draft guidelines?

• What are the initiatives taken by the government for the mental well-being of students?

• What is the significance of these guidelines issued by the SC?

• How is addiction emerging as a challenging issue among youth?

• There remained a “legislative and regulatory vacuum” in the country for suicide prevention of students in educational institutions and coaching centres. Substantiate.

Key Takeaways:

• A bench of Justices Vikram Nath and Sandeep Mehta said there remained a “legislative and regulatory vacuum” in the country with respect to a unified, enforceable framework for suicide prevention of students in educational institutions, coaching centres, and student-centric environments.

• While issuing 15 guidelines, the bench said the measures should remain in force and binding, until such time as appropriate legislation or regulatory frameworks were enacted by the competent authority.

• All educational institutions were directed to adopt and implement a uniform mental health policy, drawing cues from the “Ummeed” draft guidelines, the “Manodarpan” initiative, and the National Suicide Prevention Strategy.

• The top court highlighted Centre’s preventive steps to mitigate the situation, with “Ummeed” (understand, motivate, manage, empathise, empower, and develop) draft guidelines — meant to prevent school student suicides — released by the Ministry of Education in 2023.

• The verdict came on an appeal against an order of the Andhra Pradesh HC, rejecting the plea to transfer the probe over the unnatural death of a 17-year-old National Eligibility-cum-Entrance Test aspirant, preparing in Vishakhapatnam, to the CBI.

• The bench said all educational institutions with 100 or more enrolled students should either appoint or engage at least one qualified counsellor, psychologist, or social worker with demonstrable training in child and adolescent mental health.

• “Institutions with fewer students shall establish formal referral linkages with external mental health professionals,” the verdict said.

• The bench continued, “All residential-based institutions shall install tamper-proof ceiling fans or equivalent safety devices, and shall restrict access to rooftops, balconies, and other high-risk areas, in order to deter impulsive acts of self-harm.”

• All educational institutions, particularly coaching institutes or centres, were asked to refrain from segregating students’ batches on the basis of academic performance, public shaming, or assignment of academic targets disproportionate to their capacities.

• The bench stressed on the need for zero tolerance when it came to retaliatory actions against complainants or whistle-blowers. In all such cases, immediate referral to trained mental health professionals must be ensured, and the student’s safety, physical and psychological, should be prioritised, it said.

• “Failure to take timely or adequate action in such cases… shall be treated as institutional culpability, making the administration liable to regulatory and legal consequences,” the bench added.

• The guidelines would apply to all educational institutions, including public and private schools, colleges, universities, training centres, coaching institutes, residential academies and hostels, irrespective of their affiliation.

• The top court in a separate case took cognisance of suicides in educational institutions and directed the constitution of a National Task Force on mental health concerns of students and prevention of suicides in higher educational institutions.

Do You Know:

• Student suicides made up 7.6 per cent of all suicide cases reported across India in 2022, showing a slight dip from 8.0 per cent in 2021 and 8.2 per cent in 2020, according to official data shared in Lok Sabha.

• “The Ministry of Education’s flagship programme, Manodarpan, has reached lakhs of students through counselling helplines and live interactive sessions, while the Ministry of Health and Family Welfare’s district mental health programme (DMHP) covers 767 districts with suicide prevention services and life skills training in schools and colleges,” he said.

Other Important Articles Covering the same topic:

📍Student suicides 7.6% of all suicide cases across India: Minister

 

EXPLAINED

Three times the price of other cooking oils: Here’s why coconut oil is on fire

Syllabus:

Preliminary Examination: Current events of national and international importance

Mains Examination: General Studies-III: Major crops-cropping patterns in various parts of the country, – different types of irrigation and irrigation systems storage, transport and marketing of agricultural produce and issues and related constraints; e-technology in the aid of farmers

What’s the ongoing story: India’s annual retail food inflation rate fell to minus 1.06% in June, the lowest since January 2019. But consumers continue to feel the pinch from high prices on some items.

Key Points to Ponder:

• What is inflation?

• What is food inflation?

• What are the factors that led to inflation in the economy?

• What are the factors leading to an increase in coconut oil?

• What is the status of coconut oil production in India?

• What are the initiatives taken by the government to boost oil production in India?

• India imports cooking oil from which countries?

• Why has PM urged people to cut down on edible oil consumption by 10%?

• What is the National Mission on Edible Oils–Oilseeds (NMEO-Oilseeds)?

• Understand the soil, temperature, and conditions required for coconut cultivation

• Is it covered under the Minimum Support Price?

Key Takeaways:

• Among them is vegetable oils, where the year-on-year price increase reached 17.75% in June, according to the National Statistics Office.

• The all-India average modal (most quoted) retail price of palm oil is currently Rs 132 per kg, compared with Rs 95 a year ago, data from the Department of Consumer Affairs show. The prices of soyabean, sunflower, and mustard oils have risen from Rs 120 to Rs 154, Rs 115 to Rs 159, and Rs 150 to Rs 176 respectively over the same period.

• Since the beginning of this year, the wholesale price of coconut oil at Kerala’s Kochi market has zoomed from Rs 22,500 per quintal to Rs 39,000 per quintal. At the retail level, the oil is selling for around Rs 460 per kg, close to double its early-January price of Rs 240-250.

• This makes coconut oil more expensive now than even sesame (or gingelly) oil, a traditionally premium oil that is retailing for about Rs 425 per kg.

• “Not only are coconut oil prices at all-time highs, I haven’t in my 50 years of trading seen these go up so much in such a short time,” Thalath Mahmood, president of the Cochin Oil Merchants’ Association (COMA), said.

• The El Niño event, which lasted from July 2023 to June 2024, affected the growth of coconut flowers and fruit development during the 2024-25 marketing year that began in October. The impact is being felt now, as it takes roughly a year for a single coconut to go from flowering on the tree to a fully mature fruit that is ready for harvesting.

• No immediate supply response to high prices is expected because coconut trees – even the improved dwarf and hybrid palm varieties – start bearing fruit only in 3-5 years.

• The price sentiment has been further boosted by reports of the Indonesian government planning restrictions on the export of raw whole coconuts, amid concerns over the shortage of the fruit for local processors.

• Meanwhile, the government of the Philippines has introduced a 3% mandatory blending of coconut oil-based CME (coco-methyl ester) in diesel sold in the country from October 2024.

• Of the 5.7 lakh tonnes (lt) of coconut oil produced in India, only about 3.9 lt is used for food (cooking and frying). The rest goes into the manufacture of hair oil, cosmetics, soaps, and in other industrial applications.

• Like other indigenous cooking oils (mustard, sesame, groundnut, cottonseed), coconut oil has lost market share to the predominantly imported oils – palm, soyabean, and sunflower.

• Even in Kerala — the state that derives its name from Kera or the coconut tree — the annual consumption of coconut oil is just 2 lt, estimates COMA’s Mahmood. That is half the consumption of palm oil (4 lt) and a little more than sunflower oil (1.5 lt). From being the top producer of coconut, Kerala has now slipped to third place, behind Tamil Nadu and the No.1 producer, Karnataka.

Do You Know:

• Obesity has emerged as a growing health concern, with alarming statistics indicating a sharp rise in cases over the years. Prime Minister Narendra Modi recently brought this issue into focus, urging people to cut down on edible oil consumption by 10% as a simple yet effective step toward better health.

• Last year, the government approved the National Mission on Edible Oils–Oilseeds (NMEO-Oilseeds), with a financial outlay of `10,103 crore. India is dependent on imports to meet 58 per cent of its edible oil requirements.

• According to the Coconut Development Board, coconut cultivation requires an equatorial climate with high humidity. The ideal mean annual temperature is 27°C with 5-7°C diurnal variation. All well distributed rainfall of 1300-2300 mm per annum is preferred.

• Coconut is grown in different soil types such as laterite, coastal sandy, alluvial and also in reclaimed soils of the marshy lowlands. It tolerates salinity and a wide range of pH from 5.0 to 8.0. Proper drainage, good water holding capacity, optimum soil moisture and absence of rock or any hard substratum within 2 m of the surface are ideal for better growth and performance of the palm.

• Established in 1981, Coconut Development Board (CDB) is a statutory body established under the Ministry of Agriculture and Farmers Welfare, Government of India for the integrated development of coconut cultivation and industry in the country with focus on productivity increase and product diversification.

Other Important Articles Covering the same topic:

📍As edible oil, pulses import duty slashed, farmers say ‘we are getting hit’

📍‘To become a fit and healthy nation,’ PM Modi urges people to reduce edible oil consumption by 10%; appoints ten icons

Previous year UPSC Prelims Question Covering similar theme:

(2) Consider the following statements: (UPSC CSE 2020)

1. In the case of all cereals, pulses and oil-seeds, the procurement at Minimum Support Price (MSP) is unlimited in any State/UT of India.

2. In the case of cereals and pulses, the MSP is fixed in any State/UT at a level to which the market price will never rise.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

Why renewable alone can’t help

Syllabus:

Preliminary Examination: Current events of national and international importance

Mains Examination: General Studies-III: Infrastructure: Energy, Ports, Roads, Airports, Railways etc; Conservation, environmental pollution and degradation, environmental impact assessment

What’s the ongoing story: THE WORLD added about 582 gigawatts (GW) of renewable energy capacity in 2024, representing an increase of 15% over the previous year, according to a new report by the International Renewable Energy Association (IRENA). This was the largest annual increase in renewable energy capacity in any single year.

Key Points to Ponder:

• What is the difference between renewable and non-renewable energy?

• What are the major highlights of the report by IRENA?

• How is the monopoly of China in renewable energy production a concern for other countries?

• What were the major agreements signed at the COP28?

• What is the performance of India in the production of renewable energy?

• What is the performance of India in the Energy Transition Index (ETI) 2024?

• What are the initiatives taken by the Indian government to promote renewable energy at the domestic and global level?

• Know about the International Solar Alliance

• Renewable energy has not even begun to replace fossil fuels at the global level. As of now, it is catering mainly to the rising electricity demand. Analyse.

Key Takeaways:

• Currently, the installed capacity of renewable energy across the globe stands at more than 4,442 GW, and around 30% of the world’s electricity is produced from renewable sources.

• The new report by IRENA, which was released on July 10, also said that at the current rate of growth, the world would come close to achieving its target of tripling renewable energy installed capacity by 2030. This target is considered crucial for limiting global warming and was part of the agreement made at the COP28 meeting in Dubai in 2023.

• The rapid growth of renewable energy might give the impression that the world has made good progress on meeting its climate objectives. However, renewable energy has not even begun to replace fossil fuels at the global level. As of now, it is catering mainly to the rising electricity demand, which has increased three times since 1990 and is projected to grow even higher.

• While only around 10% of new electricity installed capacity in 2024 was fossil fuel-based, the use of fossil fuels, in absolute terms, is still growing, according to the IRENA report.

• Between 2012 and 2023, global electricity generation grew by 2.5% every year on average, and renewable energy expanded at a rate of about 6% during the same time. This has led to a steady rise in the share of renewables in the electricity generation mix. However, fossil fuels currently account for more than 70% of global electricity production.

• In absolute terms, more fossil fuels are being burned today than 10 years ago to produce electricity. To make matters worse, the increase in use of fossil fuels is expected to continue for at least a few more years. As a result, greenhouse gas emissions have reached record highs in recent years.

• Moreover, electricity is still only a small slice of total energy use. Just 20% to 22% of the total energy consumed in the world every year is in the form of electricity. Only 30% of electricity generation comes from renewable sources.

• This means that about 6% of the world’s energy consumption comes from clean sources. More than 90% still comes from fossil sources. Note that there are some countries, mainly in the Nordic region, where renewables account for a significantly higher share of total energy consumption. However, the special conditions existing in these countries are difficult to replicate elsewhere.

• The IRENA report said 71% of the renewable capacity addition last year took place in Asia. This is slightly misleading as China alone accounted for more than 62% of global additions that is, 364 GW of the 582 GW installed globally. The whole of Africa together got less than 1%.

Do You Know:

• According to projections, by 2050, even in the case scenarios, not more than 40% to 45% of the world’s total energy consumption would come from clean sources. This means that energy transition, which involves moving away from fossil fuels towards renewable energy, on its own, is unlikely to help tackle the climate crisis. That is why carbon removal interventions, which are yet to become viable, assume great importance in the fight against global warming.

• For the last few years, China has been consistently installing more renewable energy than the rest of the world combined. Apart from developed countries, China, and some large players such as India, the renewable energy footprint has not grown at a fast pace.

• However, this kind of lopsided deployment of renewable energy, coupled with the fact that China has a near monopoly on the production and supply chains of most renewable systems, could leave many countries and regions behind once again.

• Renewable energy, such as solar and wind, might be available universally — unlike, say, petrol that is found in only limited geographies — but the technologies needed to harness this energy are getting increasingly inaccessible.

• China dominates the production and manufacturing of solar PV systems, for example, but also consumes more than half of it. Large buyers such as the United States and India corner most of what is exported. There is little supply for others.

• The transition to clean and renewable energy systems is not as simple as it is sometimes made out to be. There are several layers of complexity which make the goal of curbing global temperatures below 2 degrees Celsius look increasingly unrealistic to achieve.

• At the 2015 climate conference in Paris, India in collaboration with a few other countries including conference host France, set up the International Solar Alliance (ISA) to accelerate the deployment and absorption of solar energy across the world, and mainly in the developing countries.

Other Important Articles Covering the same topic:

📍India’s ‘green’ power capacity overtakes thermal — What you must know for UPSC Exam

📍India reaches key climate goal 5 years ahead of target: The full picture, explained

Previous year UPSC Prelims Question Covering similar theme:

(3) Consider the following statements: (UPSC CSE 2016)

1. The International Solar Alliance was launched at the United Nations Climate Change Conference in 2015.

2. The Alliance includes all the member countries of the United Nations.

Which of the statements given above is/are correct?

(a) 1 only

(b) 2 only

(c) Both 1 and 2

(d) Neither 1 nor 2

ECONOMY

India misses chance to tackle UK carbon tax in trade pact. Why is it concerning?

Syllabus:

Preliminary Examination: General issues on Environmental Ecology, Biodiversity and Climate Change – that do not require subject specialisation

Mains Examination: General Studies-II: Bilateral, regional and global groupings and agreements involving India and/or affecting India’s interests.

General Studies-III: Conservation, environmental pollution and degradation, environmental impact assessment

What’s the ongoing story: India’s efforts to secure a concession for its small and medium enterprises under the UK’s Carbon Border Adjustment Mechanism (CBAM) did not materialise, as the text of the India-UK Free Trade Agreement (FTA) released on Thursday made no mention of a resolution on the contentious issue.

Key Points to Ponder:

• What is the significance of the India-UK Free Trade Agreement (FTA)?

• Know the key details of the India-UK FTA

• What is CBAM?

• What are India’s concerns regarding CBAM?

• What is the role of the WTO in resolving disputes between nations?

• What are the challenges with the Dispute Settlement Body (DSB) of the WTO?

• What are the challenges related to the WTO?

Key Takeaways:

• The UK’s CBAM, which is set to come into effect from January 1, 2027, is expected to impact India’s exports of steel, aluminium and other carbon-intensive goods. India’s steel and aluminium exports are already facing steep tariff restrictions from the US after US President Donald Trump raised the tariffs on the items to 50 per cent.

• An absence of a resolution not only weakens India’s position—as it missed the opportunity to address the levy within a legal framework—but also casts a shadow over the duty concessions won for 99 per cent of its exports to the UK under the long-negotiated trade deal as UK could raise tariffs on industrial imports once it implements CBAM.

• While the Ministry of Commerce and Industry claims that the UK trade deal will allow around 99 per cent of Indian exports to benefit from zero-duty access to the UK market, CBAM significantly could alter that.

• The UK government has said that the carbon tax will apply to both “direct and indirect emissions” embodied in imported CBAM goods, “including those emissions embodied in relevant precursor goods at a point further up the value chain”.

• India’s exports to the UK rose by 12.6 per cent to $14.5 billion, while imports grew by 2.3 per cent to $8.6 billion in 2024–25. Bilateral goods trade between India and the UK increased to $21.34 billion in 2023–24 from $20.36 billion in 2022–23.

• As no concession was secured under the FTA, India could challenge the regulation at the WTO on the grounds that CBAM violates special and differential treatment (SDT) provisions, which advocate longer implementation periods for developing countries to safeguard their trade interests.

• However, trade law experts warn that the CBAM regulations in both the UK and EU may be in effect by the time the WTO rules on the matter, given the dysfunction of the organisation’s Dispute Settlement Body (DSB).

Do You Know:

• According to the World Bank, “a carbon tax directly sets a price on carbon by defining a tax rate on greenhouse gas emissions or – more commonly – on the carbon content of fossil fuels”. It is a type of carbon pricing, and the other type of carbon pricing is the emissions trading systems (ETS). The CBAM is a form of carbon pricing system.

• The CBAM or Carbon Tax was first introduced by the European Union in 2021.  It taxes certain products coming in from other countries based on their carbon emissions footprint in their production process. For instance, if the imported steel was produced through a process that entailed higher emissions than the emissions standards for that product in Europe, it would be taxed.

• CBAM allows industries in Europe to remain competitive while continuing to maintain high environmental standards. It prevents these industries from relocating their production to countries where the production might be cheap owing to less strict emission norms, a situation described as carbon leakage. In the process, it hopes to contribute to reducing global emissions.

• However, it hurts the export competitiveness of developing countries such as China and India. The developing countries point out that CBAM overlooks the “differentiation” embedded in the global climate architecture that allows them to be treated differently from the developed nations.

Other Important Articles Covering the same topic:

📍Knowledge Nugget: What is Carbon Tax and why is it important for UPSC exam?

📍Trade deal stalled over UK carbon tax, India proposes plan for ‘rebalancing’

Prelims Question Covering similar theme:

(4) Consider the following statements: (UPSC CSE 2023)

Statement-I: Carbon markets are likely to be one of the most widespread tools in the fight against climate change.

Statement-II: Carbon markets transfer resources from the private sector to the State.

Which one of the following is correct in respect of the above statements?

(a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I

(b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I

(c) Statement-I is correct but Statement-II is incorrect

(d) Statement-I is incorrect but Statement-II is correct

ALSO IN NEWS
25 OTT platforms, including Ullu and ALTT, blocked for streaming obscene, pornographic content	The Ministry of Information and Broadcasting (I&B) has directed that public access to 25 OTT platforms, including Ullu, ALTT, and Desiflix, be disabled for streaming obscene, and at times, pornographic content, sources in the government said. The direction to block the websites and apps of these 25 OTT platforms came on July 23, they added.

 

PRELIMS ANSWER KEY

1. (d)  2. (d)  3. (a)   4. (b)

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