EU CBAM Rules on Energy Efficiency Restrict Indian Export of Textiles, Footwear

· The CBAM ecodesign regulations are to kick in 24 months after its publication in the official journal

[ABS News Service/18.06.2024]

The European Union's new eco-design regulation, setting stringent sustainability requirements for all products in the bloc, is expected to hit Indian exporters, particularly smaller businesses, as it bans the destruction of unsold textiles and footwear, which could limit orders.

The guidelines issued a few weeks ago has mandated product durability, reusability and energy efficiency, and is in line with a series of steps, including carbon border adjustment mechanism and the deforestation regulations that have been put in place.

CBAM is seen as a unilateral move that may be challenged at the WTO. The CBAM ecodesign regulations are to kick in 24 months after its publication in the official journal.

The European Commission can introduce similar bans for other products in the future, an official statement said. "There are certain products that must comply with minimum requirements related to energy efficiency. These are called ecodesign requirements and the aim is to reduce the negative environmental impact throughout the product's lifecycle," EU explained on its website.

"While industry is adjusting to the new ESG (environmental, social and governance) norms, these kinds of changes that come up suddenly particularly affect small players," said Mithleshwar Thakur, secretary general at Apparel Export Promotion Council.

The adoption of the regulations by the European Council has temporary exclusions for SMEs, but they are not seen to be sufficient.

"This new regulation replaces the existing ecodesign directive and broadens its scope to encompass all goods placed in the EU market, beyond just energy products. To encourage the public purchase of green products, ecodesign criteria will be applied in public procurement. It will also align with the Digital Services Act for products sold online," the EU statement said.

The regulation applies to a wide array of products, with exceptions, like cars and defence-related items. It introduces new requirements including product durability, reusability, upgradability, reparability and energy & resource efficiency, it added. There are norms regarding substances that restrict circularity, recycled content, remanufacturing, recycling, and environmental footprints.