Editorial 1 : Europe’s carbon burden
Recent Context:
- Recently, The European Union announced the gradually implementation of the carbon border adjustment mechanism (CBAM) that is viewed as a resurgence of frictions in an inherently unequal trading system
- CBAM is part of EU’s attempts to mitigate the effects of climate change that include an emission trading system used to price emissions
EU’s “Fit for 55 Agenda” for effect implementation of CBAM
- As the EU ramps up its efforts to withdraw free allowances in the system, there is a worry that businesses will relocate to jurisdictions with no such comparable regulations.
- Carbon leakage has compelled the EU to supplement its “Fit for 55 Agenda” with a levy on imports from countries that do not price carbon
Impact of CBAM on trade and commerce between EU and other countries
- The EU is an important trading partner. Even though its regional trade is significant, the composition of trade in specific commodities and services is not EU dominated.
- For example, Turkey, Russia, South Korea, India and China are the top five sources of steel imports for the EU. Similarly, Russia and Mozambique account for 50 per cent of its aluminum imports.
- Both these products along with cement, fertiliser, electricity and hydrogen will be covered under the initial phase of the CBAM.
- The worry is this will significantly impact trade with countries such as India that depend on the EU for its exports 26.4 per cent of India’s exports of products are potentially covered by CBAM.
India and EU trade relation and preparedness of Indian corporate houses
- EU is India's third largest trading partner, accounting for 10.8% (around €88 billion) of our total trade in goods.
- Many within the Indian corporate sector have been preparing for the compliance of CBAM norms.
- For example, Tata Steel operates in the EU market and has experience with transitioning to green steel. As per its annual report 2022-23, CBAM will encourage the company to transition faster and the experience will help with the transition in India
- Along with it, carbon-related costs (not CBAM) are to be borne by the society, either through higher steel prices or through public spending or subsidies.
The possible outcomes due to rise in taxation under CBAM
- It is possible that the EU may end up losing on account of higher input costs as they may be passed on to consumers.
- Steel and aluminum are crucial not just for its major exports such as vehicles but also for green transition (aluminum).
- CBAM will apply to aluminum even as the EU lists it as a critical mineral and struggles to lift its production.
- It is hard to reconcile these with the application of a tariff on imports except for the reason that CBAM is designed to keep countries such as China —suppliers of minerals out of the EU. A similar approach was adopted in the past to protect smelters.
How should India respond to this tax?
- There is the WTO to contest the measure as discriminatory. However, CBAM raises more serious concerns on the structure of the manufacturing sector that will be dominated by companies and countries that are able to withstand the winds of change.
- The EU and the US have responded to the challenge by designing incentive schemes to attract investments and to remain competitive.
- India too may have to innovate. With limited fiscal space, an internal carbon market along with an effective taxing mechanism may not only nudge firms in that direction, but also can support consumers and smaller businesses
- Such pricing mechanisms can also work as a tool to negotiate equivalence with the CBAM, as common but differentiated responsibility would mean that India can price carbon differently as per its level of development.
Conclusion:
- CBAM is significant imitative of EU to check on carbon emission during manufacturing services and trade & commerce which will help in countering climate change
- However, there is need that India must respond with a policy that ensures pricing of carbon in line with its development priorities.
Editorial 2 : A win-win partnership on AI
Context:
- Indian talent has shaped the digital technologies that have transformed the world in recent decades.
- And today, Indian engineers are building many of the tools that will power the next great technological advance generative AI.
- But while India remains a hotbed of tech talent, many of the big companies with the vast computing power to build new AI models are based in Silicon Valley
How to ensure that these foundational technologies serve India’s unique needs?
- A big debate in policy circles around the world has been about whether big tech companies should keep their AI models in-house or make them available more openly.
- As the debate has rumbled on, the case for openness has grown. As, it’s not sustainable to keep foundational technology in the hands of just a few large corporations and also because of the proven track record of open sourcing.
- The infrastructure of the internet runs on open-source code, as do web browsers and many of the apps that billions use every day.
- Therefore, embracing an open approach to AI technologies can turbocharge India’s digital economy.
- There is already a huge appetite for open-source technology in India.
- The government has put AI at the heart of its vision for the Indian “techade” and declared its intention to make India a global powerhouse for AI. And, it has accompanied rhetoric with action
- for example, by supporting open source repositories like Bhashini, which uses AI and natural language processing (NLP) technologies for speech and text translation.
Tech companies should share the details of their work publicly
- Tech companies should also share the details of their work publicly as they iterate, be it through academic papers and public announcements, open discussion of the benefits and risks, and, where appropriate, making the technology itself available for both research and product development.
- A common but mistaken assumption is that releasing source code or model weights makes systems more vulnerable.
- On the contrary, it means thousands of developers and researchers can identify and solve potential problems that teams holed up inside company siloes would take much longer to do.
- By seeing how these tools are used by others, in-house teams can learn from them and fix vulnerabilities.
There is need for collaboration across industry, government, academia and civil society
- This openness should be accompanied by collaboration across industry, government, academia and civil society.
- For example, Meta is a founding member of the Partnership on AI, and is participating in its Framework for Collective Action on Synthetic Media, an important step in ensuring guardrails are established around AI-generated content.
- Therefore, open innovation leads to better products, faster innovation and a flourishing market, which benefits Meta as it does many others.
- And it doesn’t mean every model can or should be open-sourced. There’s a role for both proprietary and open AI models. But ultimately, openness is the best way to spread the benefits of AI, which is why it must remain at the heart of India’s approach to technology.
India’s initiative in the field of AI
- Openness and collaboration is as important for governments as it is for tech companies.
- As, this year India has the presidency of the Global Partnership on Artificial Intelligence (GPAI) which brings together leaders and experts from across science, industry, civil society, international organisations and government.
- Coupled with its presidency of the G20, India is in a unique position to shape the way emerging technologies are harnessed for years to come
Conclusion
Supporting open innovation in AI during this crucial early stage in the development of these technologies could prove to be transformative for India and the world.