CURRENT AFFAIRS – 03/06/2023

The European Union’s (EU) key climate law, the Carbon Border Adjustment Mechanism (CBAM), has spooked India. New Delhi fears that CBAM will cripple the export of its carbon-intensive products to the EU. While India’s exports may be limited to aluminium, iron, and steel, and affect only 1.8% of its total exports to the EU, India has reportedly decried CBAM as being protectionist and discriminatory. There is also talk of challenging the CBAM at the World Trade Organization (WTO)’s dispute settlement body. This debate brings to the forefront the inter-linkages between trade and the environment. While the international trade regime allows countries to adopt unilateral measures for safeguarding the environment, environmental protection should not become a smokescreen for trade protectionism. The CBAM needs to be viewed from this standpoint.

In 2005, the EU adopted an important climate change policy known as the Emissions Trading System (ETS). Now in its fourth stage, the ETS is a market-based mechanism that aims at reducing greenhouse gas (GHG) emissions by allowing bodies emitting GHG to buy and sell these emissions amongst themselves. However, the EU’s concern is that while it has a mechanism for its domestic industries, emissions embedded in products imported from other countries may not be priced in a similar way due to a lack of stringent policies or due to less stringent policies in those countries. This, the EU worries, would put its industries at a disadvantage. To tackle this, the impacted industries in the EU had so far been receiving free allowances or permits under the ETS. Furthermore, the EU also apprehends the phenomenon of ‘carbon leakage’, that is, due to the application of ETS, European firms operating in carbon-intensive sectors might possibly shift to those countries that have less stringent GHG emission norms.

CBAM is aimed at addressing this quagmire, and, thus, levelling the playing field for the EU industries. Under the CBAM, imports of certain carbon-intensive products, namely cement, iron and steel, electricity, fertilizers, aluminium, and hydrogen, will have to bear the same economic costs borne by EU producers under the ETS. The price to be paid will be linked to the weekly average of the emissions priced under the ETS. However, where a carbon price has been explicitly paid for the imported products in their country of origin, a reduction can be claimed.

A cornerstone principle of WTO law is non-discrimination. Thus, countries are required to accord equal treatment to ‘like’ products irrespective of their country of origin (most-favoured nation treatment) and to treat foreign-made ‘like’ products as they treat domestic ones (national treatment principle). While the CBAM’s design is origin-neutral in appearance, it may, in its application, discriminate between goods from different countries on account of an inadequate carbon pricing policy, or due to onerous reporting requirements that importers would be subject to.

A key consideration in all this may be whether the carbon-intensive products to which the CBAM applies are ‘like’. While steel products may appear similar, the process by which electric arc furnaces produce steel is less carbon-intensive than the steel produced in blast furnaces, for instance. Being products that are not ‘like’, the rules on non-discrimination would have little application in such a case. Accordingly, the debate on CBAM reignites a long-standing debate in international trade law circles: must processes and production methods be relevant for comparing products? Traditionally, the answer to that in WTO jurisprudence has been no, and, on that account, as commentators have noted, the CBAM violates WTO law for discriminating between EU and foreign products covered by CBAM based on the embedded emissions.

However, even if the EU’s CBAM is discriminatory, there could be a claim for justifying it under the General Exceptions clause given in Article XX of the General Agreement on Tariffs and Trade (GATT). Under Article XX, measures taken by countries that otherwise violate GATT obligations are permitted if, first, they fall under one of the listed policy grounds, and second, if they satisfy the requirements of the introductory clause of Article XX, known as the chapeau. One of the listed policy grounds in Article XX is ‘conservation of exhaustible natural resources’. CBAM would fall under this category. However, it is doubtful if it would satisfy the chapeau, which inter alia requires that countries do not apply measures in a manner that results in arbitrary or unjustifiable discrimination between countries where the same conditions prevail. As commentators argue, the CBAM only considers ‘explicit’ carbon prices, not ‘implicit’ costs (non-price-based costs) borne by products originating in certain countries. Accordingly, it arbitrarily or unjustifiably discriminates between countries where the same environmental conditions exist.

Finally, CBAM is also an important issue in the ongoing India-EU free trade agreement negotiations. India should work with the EU to secure gains on CBAM and ensure smooth onboarding for Indian exporters to maximise the benefits of a bilateral deal, even as the possibility of a WTO challenge remains open.

IRDAI’s plan to improve insurance awareness and penetration in the hinterland is all set to gain momentum with the insurance regulator issuing draft guidelines for Bima Vahak, a dedicated distribution channel to reach out to every Gram Panchayat.

A core component of its ‘Insurance for all by 2047’ goal, Bima Vahak will be the crucial last-mile connect for insurers in the form of a field force comprising corporate as well individual Bima Vahaks, primarily comprising women, who can gain the trust of locals for the distribution and servicing of insurance products.

However, insurers will remain responsible for ensuring KYC and AML compliance with respect to the policies sourced through the Bima Vahaks, according to the draft guidelines that will be open for comments up to June 22.

“Bima Vahak holds immense promise and will be a powerful force to enhance insurance inclusion. With the Bima Vahaks engaging with the diverse needs in every Gram Panchayat, insurers can adapt their offerings to provide comprehensive coverage and address financial protection needs,” said Prashant Tripathy, MD and CEO of Max Life Insurance.

At least 70 passengers were feared dead and more than 350 injured in a major rail accident involving two express trains and a goods train in Balasore district of Odisha on Friday evening.

The accident took place at around 7 p.m. when two coaches of 12864 (SMVB-HWH) Yashwantpur-Howrah Express derailed near Bahanaga railway station. The derailed coaches toppled towards the adjoining track and hit the speeding 12841 Coromandal Express coming from the opposite direction. It led to derailment of about 17 coaches.

A goods train was also involved in the accident as some of the coaches of the Coromandel Express hit its wagons after getting derailed, Odisha Chief Secretary P.K. Jena said.

Railway officials were, however, hesitant to state the exact cause of the accident and were waiting for outcome of initial findings. The toll is likely to go up as disaster response teams and local residents were retrieving bodies from under derailed coaches.

The Coromandel Express, a long-distance train connecting West Bengal with Tamil Nadu had left Shalimar station earlier in the day. Its passengers comprise mostly residents of West Bengal who visit Tamil Nadu either for work or to avail of better healthcare facilities.

The accident is being described as one of the worst in recent times. In 2013, the Coramandel Express had met with an accident in Jajpur district of Odisha, about 50 km away from the present accident site. Though the Odisha government had deployed dozens of teams under supervision of over 10 senior Secretaries and a Minister, chaos prevailed at the accident site and at healthcare centres.

Generative artificial intelligence (AI) is AI that can create new data. There are many instances of generative AI in the world today, most commonly used to generate text, images, and code in response to users’ requests, even if they are capable of more. Their widespread adoption really embellished their capabilities, leading to awe, then worry. OpenAI’s ChatGPT chatbot mimics intelligence very well; today, it has become synonymous with the abilities of generative AI at large. In the last few years, AI models backed by neural networks trained on very large datasets and with access to sufficient computing power have been used to do good, such as finding new antibiotics and alloys, for clever entertainment and cultural activities, and for many banal tasks, but it has caught attention most notably with its ability to falsify data. The world is past being able to reliably differentiate between data that faithfully reflects reality and data made to look that way by bad-faith actors using AI. This and other developments led a prominent group of AI pioneers to draft a single-sentence, and alarmist, statement: “Mitigating the risk of extinction from AI should be a global priority alongside other societal-scale risks such as pandemics and nuclear war.” Dishonest actors wielding AI are one of many threats, but the statement is too simple to admit the complexity of human society.

Some specific concerns enumerated in other communiqués are worth taking seriously, however: the inscrutability of the inner workings of AI models, their use of copyrighted data, regard for human dignity and privacy, and protections from falsifying information. The models being developed and used today are not mandated to tick these boxes, even as there is no way to understand the risks they pose. So, even at a point when the computational resources required to run AI models in full coincide with that available in consumer electronics, the world will need at least rolling policies that keep the door open for democratic institutions to slam the brakes on dangerous enterprises. At this time, the Indian government should proactively launch and maintain an open-source AI risk profile, set up sandboxed R&D environments to test potentially high-risk AI models, promote the development of explainable AI, define scenarios of intervention, and keep a watchful eye. Inaction is just not an option: apart from the possibility of adverse consequences, it could render India missing the ‘harnessing AI for good’ bus.

The Law Commission may be considering to work on the issue of Uniform Civil Code, Justice Ranjana Prakash Desai (retd) said on Friday after a meeting with its Chairperson and members. Justice Desai heads the committee preparing a draft of the code for Uttarakhand.

On Friday, the members of the Uttarakhand UCC panel, including Justice Desai, who is also the current head of the delimitation commission, and former Uttarakhand Chief Secretary Shatrughna Singh, met Law Commission chairperson Justice Ritu Raj Awasthi and members K.T. Sankaran, Anand Paliwal and D.P. Verma.

Speaking to the media, Justice Desai said that the meeting was a courtesy call. “Because we are working on the UCC draft in Uttarakhand and probably they are alsothinking about it. So they made a courtesy call and asked what kind of work has been done by us. We have also given a little idea to them,” Justice Desai said.