INTEGRATED MAINS AND PRELIMS MENTORSHIP (IMPM) 2025 Daily KEY
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Carbon Border Adjustment Mechanism (CBAM) and Goods and Services Tax (GST) its significance for the UPSC Exam? Why are topics like European Free Trade Association (EFTA), National Critical Minerals Mission important for both preliminary and main exams? Discover more insights in the UPSC Exam Notes for October 18, 2025 |
Indian iron and steel exporters face the highest CBAM levy
For Preliminary Examination: Current events of national and international Significance
For Mains Examination: GS III - Environment and Ecology
Context:
Indian exporters of iron and steel to EU may have to pay about €301 million (approximately ₹3,000 crore) in Carbon Border Adjustment Mechanism (CBAM) fees, the highest among all countries exporting similar products to the EU, an analysis by European non-profit think-tank Sandberg has found
Read about:
Carbon Border Adjustment Mechanism (CBAM)
Greenhouse gas (GHG) emissions
Key takeaways
- The Carbon Border Adjustment Mechanism (CBAM) is a policy tool introduced by the European Union (EU) to address the issue of “carbon leakage” — a situation where industries shift production to countries with weaker climate regulations to avoid the costs of reducing greenhouse gas emissions.
- Essentially, CBAM ensures that imported goods into the EU face a carbon price equivalent to what EU producers pay under the EU’s Emissions Trading System (ETS).
- Under the EU’s climate policies, industries within the region are required to purchase carbon credits for every tonne of carbon dioxide they emit. This system creates a financial incentive to adopt cleaner technologies and reduce emissions.
- However, if foreign producers exporting to the EU are not subject to similar carbon pricing in their home countries, they gain a cost advantage. The CBAM aims to neutralize this imbalance by imposing a carbon tariff on such imports.
- The mechanism initially covers carbon-intensive sectors such as iron and steel, cement, aluminum, fertilizers, electricity, and hydrogen—areas that are both energy-intensive and highly traded globally. Importers in the EU will need to report the embedded emissions of their products and purchase corresponding CBAM certificates to cover these emissions. The price of these certificates will mirror the price of carbon within the EU’s ETS.
- For developing countries, including India, CBAM raises significant concerns. It could act as a trade barrier by making exports to the EU more expensive if domestic producers cannot demonstrate low carbon footprints. This may also pressure developing economies to adopt stricter climate measures and carbon accounting mechanisms to maintain export competitiveness.
- In essence, the CBAM represents a major step in linking global trade with climate policy. While it supports the EU’s goal of achieving net-zero emissions by 2050, it also introduces new dynamics in international trade, prompting debates on climate justice, fairness, and the responsibilities of developed versus developing nations in combating global warming
Additional Information
- According to a recent analysis by the European think tank Sandberg, Indian exporters of iron and steel to the European Union (EU) may incur approximately €301 million (about ₹3,000 crore) in charges under the Carbon Border Adjustment Mechanism (CBAM)—the highest liability among all nations exporting similar products to the bloc.
- The CBAM functions as a carbon levy imposed on European importers who purchase goods from countries where production generates higher carbon emissions per tonne than comparable goods produced within the EU.
- Sandberg’s newly released online calculator estimates that Russia will face the second-highest CBAM costs at €240 million, followed by Ukraine (€198 million) and China (€194 million).
- The study further reveals that when India’s exports of aluminium and cement are included alongside iron and steel, its total CBAM liability amounts to around €330 million, equivalent to roughly 1.05% of the value of all traded goods.
- However, it also highlights a potential opportunity — Indian industries could increase revenues by about €510 million if they adopt cleaner and more energy-efficient technologies, thereby offsetting nearly €180 million in net costs.
- India has, however, consistently voiced opposition to the CBAM, with several industry associations labelling it a form of “non-tariff barrier” that could adversely affect the competitiveness of Indian exports in European markets
Follow Up Question
Mains
1.“The European Union’s Carbon Border Adjustment Mechanism (CBAM) represents a new intersection between climate policy and international trade.”
Critically examine the implications of CBAM for India’s exports and its alignment with the principles of climate justice and the WTO framework. Suggest measures India can adopt to mitigate its economic and environmental impact.
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Note: This is just a model answer and a Model Structure model
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1.Which of the following adopted a law on data protection and privacy for its citizens known as ‘General Data Protection Regulation’ in April, 2016 and started implementation of it from 25th May, 2018? (UPSC CSE 2019)
(a) Australia
(b) Canada
(c) The European Union
(d) The United States of America
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Answer (c)
The General Data Protection Regulation (GDPR) is a comprehensive data protection law adopted by the European Union (EU) in April 2016, and it came into effect on 25th May 2018. It establishes strict rules on how personal data of EU citizens can be collected, processed, stored, and transferred — both within the EU and by entities outside it that handle EU residents’ data. The GDPR gives individuals greater control over their personal information through rights such as:
It also mandates organizations to obtain explicit consent for data processing and to report data breaches promptly. The regulation has become a global benchmark for privacy and data protection laws, influencing similar frameworks in several countries, including India’s Digital Personal Data Protection Act, 2023 |
Why is the fiscal architecture of municipalities flawed?
For Preliminary Examination: Current events of national and international Significance
For Mains Examination: GS III - Economy
Context:
Urban India generates nearly two-thirds of the national GDP, yet its municipalities control less than one per cent of the country’s tax revenue. Indian cities are not generating revenue, not because they are inefficient, but because the fiscal architecture has failed them. Today, municipal finance is dependent on intergovernmental transfers, loans, and schemes. The core of the problem lies in the centralisation of taxation powers.
Read about:
Gross Domestic Product (GDP)
Goods and Services Tax (GST)
Key takeaways:
Urban India contributes close to two-thirds of the nation’s GDP, yet its municipalities manage less than one per cent of total tax revenue. This revenue gap does not stem from inefficiency at the city level, but from a structurally flawed fiscal framework. Municipalities today depend primarily on intergovernmental transfers, loans, and centrally sponsored schemes for survival. The root cause lies in the centralisation of taxation powers, which has stripped cities of their financial independence.
How did cities lose fiscal control?
- The introduction of the Goods and Services Tax (GST) significantly eroded local revenue bases. Traditional municipal revenue streams such as octroi, entry tax, and local surcharges—which once formed nearly one-fifth of city-level income—were absorbed into the GST regime.
- The promised compensatory mechanisms failed to reach municipalities, leaving them even more reliant on State and Central grants.
- Consequently, urban local bodies now function with limited fiscal autonomy and unpredictable income sources, resulting in what may be called a reversal of democratic logic: decision-making remains centralised while service delivery is decentralised.
- Cities are tasked with managing waste, affordable housing, urban mobility, and climate resilience—yet lack the funds to support these mandates.
Can municipal bonds be the answer?
- Policy documents—from NITI Aayog’s urban vision to reform-linked grants—promote municipal bonds as a tool for urban finance. However, the credibility of these bonds remains weak.
- The problem is not only cities’ limited ability to raise capital but also the flawed criteria used to assess their creditworthiness. Ratings are often based narrowly on “own-source revenue” such as property taxes, fees, and user charges, while regular intergovernmental grants are discounted as “non-recurring income.” This approach reinforces the false notion that cities survive on charity.
- In reality, such transfers are constitutional entitlements—a part of the redistributive framework envisioned by the 74th Constitutional Amendment, which recognised municipalities as an equal tier of government.
- Yet, institutions like the World Bank and ADB continue to advocate for “self-reliance” through property taxation and user charges. While reforming property tax systems is necessary, relying solely on them is both inadequate and inequitable.
- Property tax rarely contributes more than 20–25% of a city’s potential revenue, and raising it is politically sensitive.
- Moreover, the “user-pays” model unfairly burdens poorer communities already suffering from poor urban services. Essential services such as clean water, sanitation, and public transport are collective goods, not commodities to be bought and sold.
The way forward
To secure a sustainable urban future, India must democratise its fiscal architecture. Lessons can be drawn from Scandinavian models, where municipalities in Denmark, Sweden, and Norway have the authority to levy and collect local income taxes. This creates fiscal transparency and accountability, as citizens directly see how their taxes fund local services. Importantly, transfers from higher levels of government are treated not as discretionary grants but as shared fiscal responsibilities within a cooperative system.
India needs a reimagined model of fiscal federalism that guarantees predictable, adequate, and untied revenues for urban local bodies—both through their own sources and constitutionally mandated transfers. For municipal bonds to become credible, cities must be allowed to treat grants and shared taxes as legitimate components of income. Credit ratings should also incorporate governance quality—including transparency, audit discipline, and citizen participation—rather than relying solely on financial numbers. Cities could also use part of their GST compensation or State revenue share as collateral to secure borrowing
Follow Up Question
Mains
1.Despite contributing significantly to India’s GDP, urban local bodies remain fiscally constrained due to excessive centralisation of taxation powers. Discuss the challenges of municipal finance in India and suggest measures to strengthen the fiscal autonomy of urban governance.
(Answer in 250 words)
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This Answer or instructions are only for reference
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- The European Free Trade Association (EFTA) is an intergovernmental organization established in 1960 as an alternative to the European Economic Community (EEC), which later became the European Union (EU). Its main purpose is to promote free trade and economic integration among its member countries without requiring them to join the EU.
- The founding idea behind EFTA was to provide a platform for countries that wanted to enjoy the benefits of trade liberalization in Europe but did not wish to participate in the deeper political and economic union envisioned by the EEC.
- While many of its original members later joined the EU, the current EFTA membership includes Iceland, Liechtenstein, Norway, and Switzerland.
- EFTA works to remove tariffs and trade barriers among its members and to negotiate free trade agreements (FTAs) with other countries and regional blocs around the world. This allows its members to access global markets on favorable terms while maintaining their own national trade policies.
- Notably, three of the four EFTA members — Iceland, Liechtenstein, and Norway — are also part of the European Economic Area (EEA), which gives them access to the EU’s single market while remaining outside the EU’s customs union and political institutions. Switzerland, on the other hand, has chosen to maintain a separate set of bilateral agreements with the EU to regulate its trade and cooperation.
- In essence, EFTA represents a model of economic cooperation based on sovereignty and flexibility, enabling small but advanced economies to participate in global trade networks without full EU membership. It plays a significant role in promoting open markets, economic stability, and cooperation among European and global trading partners
- India achieved independence during the turbulent period of the Cold War, when two competing economic systems — capitalism and socialism — were shaping global politics. Emerging from years of colonial exploitation, India deliberately chose to remain non-aligned, avoiding formal association with either bloc.
- Instead, the country pursued a balanced and pragmatic economic approach, blending features of both capitalist and socialist models to suit its distinctive developmental needs.
- After years of limited engagement, India has renewed its focus on Europe, at a time when the continent itself is beginning to redefine its global role — moving away from being merely an extension of the United States within the broader “collective West.”
- Since the Second World War, the notion of “the West” has implied a political and strategic unity dominated by American power, with Europe and Japan largely deferring to Washington.
- The collapse of the Soviet Union further reinforced this unity, briefly bringing Russia into Western institutions such as the G7 and giving rise to the 1990s belief in the “end of history” and the triumph of liberal democracy.
- However, this unipolar moment did not last. A resentful Russia began seeking greater respect in international affairs, while a rising China set out to challenge Western dominance by constructing an alternative global order.
- In recent years, internal rifts within the Western bloc have become more visible, giving rise to what can be described as a “multipolar West.” India’s foreign policy increasingly reflects an understanding of this evolving dynamic.
- The “America First” approach under former U.S. President Donald Trump deepened these divisions by questioning alliances, revising security commitments, and altering global norms.
- This period compelled both Europe and Asia to reconsider their dependence on U.S. leadership and to pursue strategic autonomy in anticipation of a more unpredictable American role.
- Today, differences among Western allies — on issues like Russia, China, trade, and technology — are substantial. Europe also views with unease the political polarization in the U.S., where internal cultural and ideological conflicts are spilling over into transatlantic relations.
- Despite persisting internal divisions — between eastern and western threat perceptions and northern and southern economic priorities — Europe is unmistakably moving toward greater strategic coherence and a more independent geopolitical identity. This evolution is not a sign of decline but a reconfiguration of power within the West.
- Europe is actively strengthening its defence capabilities, expanding cooperation both within the EU and with partners such as the UK, Canada, Japan, and South Korea. On the economic front, it is seeking to diversify trade by building deeper ties with the Indo-Pacific and Latin America.
- Similarly, America’s key allies in Asia — including Australia, Japan, South Korea, and ASEAN — are adapting to a world where U.S. commitments are less predictable, balancing the need to manage risks with opportunities emerging from a more pluralistic Western order.
- Within this changing landscape, India has become a central partner in Europe’s strategic diversification. The EU’s Joint Communication on relations with India (September 2025) emphasizes that India and Europe share a mutually reinforcing relationship — “India’s success benefits the EU, just as the EU’s success benefits India.”
- For India, however, a multipolar West presents both opportunities and challenges. On one hand, it creates greater flexibility and space for forming varied partnerships within the Western bloc. On the other, the fragmentation of Western unity could dilute global responses to authoritarian assertiveness and introduce new forms of instability in the international order
Broad-based Trade and Investment Agreement (BTIA)’ is sometimes seen in the news in the context of negotiations held between India and (2017)
(a) European Union
(b) Gulf Cooperation Council
(c) Organization for Economic Cooperation and Development
(d) Shanghai Cooperation Organization
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Answer (a)
The Broad-based Trade and Investment Agreement (BTIA) refers to the proposed Free Trade Agreement (FTA) between India and the European Union (EU). Negotiations for this agreement began in 2007, aiming to enhance trade in goods and services, promote investments, and strengthen economic cooperation between India and the EU. However, talks have faced multiple challenges over issues such as market access, intellectual property rights, data protection, and tariff reductions. Efforts to revive negotiations have continued in recent years to deepen the India–EU economic partnership |
Microplastics pollution threatens Goa’s estuarine fisheries, human consumers
For Preliminary Examination: Current events of national and international Significance like Plastic Pollution
For Mains Examination: GS III - Environment and Ecology
Context:
Researchers identified 4,871 polluting particles, of which 3,369 particles were plastic polymers of 19 types. Researchers found more contamination on the sea floor than in open water. Particles were mainly from fishing material and wastewater
Read about:
Single Plastic Use
Microplastic Pollution
Key takeaways:
- Microplastics present in aquatic environments can be consumed by microscopic organisms, which are then eaten by progressively larger species. This causes microplastics to build up in the bodies of animals higher in the food chain, increasing their overall exposure and toxic effects — a process known as bioaccumulation.
- To investigate how microplastics accumulate along the Goan coastline, researchers from the CSIR–National Institute of Oceanography (Goa) and the Academy of Scientific and Innovative Research (Ghaziabad) examined the feeding habits and habitats of 251 fish belonging to nine species of finfish and shellfish.
- Their samples included economically important species such as mackerel, anchovy, oyster, clam, catfish, and sardine, collected from varying ocean depths.
- Their findings, published in Environmental Research (August edition), identified 4,871 foreign particles within the sampled fish, out of which 3,369 were confirmed as plastic polymers representing 19 distinct types.
- The researchers observed higher concentrations of these particles on the sea floor and bottom sediments (benthic region) compared to the open-water (pelagic zone).
- Most of the detected plastics originated from discarded fishing gear and wastewater runoff from human settlements.
- According to the study, affected fish showed signs of genetic disruption, oxidative stress, reproductive impairment, and stunted growth. Humans consuming such fish could also face immune system disturbances, increased cancer risk, and neurological toxicity.
- Fishing activities around Goa are mainly concentrated in estuaries, which are ecologically vital zones supporting young fish and providing feeding areas for mature ones. These estuaries are rich in finfish and shellfish, species that are popular in Indian diets for being nutritious, affordable, and easily available.
- Small pelagic species such as anchovies, sardines, and mackerel are central to estuarine food chains. They feed on plankton and attract larger predators. As filter feeders, they trap particles from surrounding water, making them especially prone to microplastic ingestion.
- These smaller fish are preyed upon by larger species, including elasmobranchs like sharks, which dwell in coastal shelf waters. Through this trophic transfer, microplastics gradually travel up the food web, ultimately reaching apex predators and humans.
- The study focused on fish from the Mandovi estuarine system, part of the Mandovi–Zuari network, which accounts for nearly 97% of Goa’s total fish production. Researchers used the bamboo shark, an apex predator, to examine the long-term impacts of microplastic accumulation.
This work addressed five key research gaps:
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Levels of microplastic contamination in commercially important fish;
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Factors influencing microplastic uptake;
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The main body parts through which ingestion occurs;
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Evidence of ingestion in the bamboo shark; and
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The health implications for both marine life and human consumers along Goa’s coast.
- To explore these questions, scientists analyzed 30 specimens each of mackerel, sardine, anchovy, bamboo shark, sole fish, catfish, clam, and oyster, and 11 green mussels. They grouped the species according to feeding behavior — filter feeders, planktivores, secondary consumers, and carnivores — and measured microplastic levels in their soft tissues.
- Results showed that anchovies had the highest concentration among pelagic species, with 8.8 microplastic particles per fish, while catfish led the benthic group with over 10 particles per fish. The bamboo shark contained the least, at 3.5 particles per fish, while seawater samples recorded 120 microplastic particles per litre.
- Interestingly, smaller fish tended to accumulate more microplastics, and those living closer to contaminated sediments ingested higher quantities.
- Among finfish, more microplastics were detected in the digestive tract than in the gills, suggesting ingestion through food and water. As water passes through gills, particles may also become trapped, causing potential respiratory stress.
- The study identified four main shapes of microplastics — fibres (53%), fragments (29.9%), films (13.1%), and beads (4%) — appearing in nine colors, most commonly blue (37.6%), black (24.3%), and red (12%). The colors and forms helped trace their origins to fishing nets, tyre residue, electronic waste, packaging materials, and textiles.
- In terms of environmental impact, the research categorized Goa’s marine region as low-risk overall, but found that benthic species are more vulnerable than pelagic ones. Out of the 19 polymer types, 11 were identified as highly toxic.
- Furthermore, 66 of the 71 shellfish species studied displayed poor nutritional quality, echoing previous research that links microplastic contamination to reduced protein, fatty acid content, and overall fitness in fish.
Follow Up Question
Mains
1.Microplastic contamination in marine ecosystems poses a serious threat not only to aquatic biodiversity but also to human health and coastal livelihoods. Discuss the findings and implications of recent studies on microplastic bioaccumulation along the Goan coast in this context. Suggest measures to mitigate microplastic pollution in India’s coastal waters
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Note: This is Model not a Model Answer Instructions this is only a reference
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Prelims
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Answer (D)
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- The National Critical Minerals Mission (NCMM) seeks to accelerate the exploration of vital minerals both within India and in its offshore territories. It also envisions a streamlined regulatory mechanism to fast-track approvals for critical mineral mining projects.
- The mission’s objective is to encourage Indian public and private enterprises to secure ownership of critical mineral assets overseas and expand trade partnerships with resource-rich nations. It also emphasizes the creation of a national stockpile of essential minerals.
- The initiative aims to fortify India’s critical minerals value chain by developing an integrated technological, regulatory, and financial ecosystem, ensuring a steady supply from both domestic and international sources. This is expected to enhance India’s access to raw materials essential for clean energy, defence, electronics, and agriculture sectors.
- As per a 2024 report by the Institute for Energy Economics and Financial Analysis (IEEFA), India’s demand for critical minerals may more than double by 2030, even though domestic mining is likely to take over a decade before full-scale production begins.
- Responding to the US tariff threats, the Chinese Embassy reiterated that while China does not seek a trade war, it is ready to face one if necessary.
- Despite a softer stance from the Trump administration, it may not necessarily prevent future tensions with China or India. The US continues to maintain 50% tariffs on Indian exports, notwithstanding the diplomatic warmth expressed between Trump and Prime Minister Modi.
- Confronted with rigid US trade demands, India appears more open to internal reforms. NITI Aayog CEO B.V.R. Subrahmanyam recently stated that following the GST rate rationalisation, additional reforms could follow, while emphasizing deeper trade engagement within Asia.
- Amid shifting global trade dynamics, India is cautiously easing tensions with China. Direct air services between the two nations have resumed after five years, and the Indian government is reassessing Chinese investment proposals.
- The United States’ tariffs on India and China, justified as a corrective to trade imbalances, have been questioned by the WTO, which recently clarified that such imbalances are not inherently harmful, but rather a natural outcome of open trade economies.
- The WTO’s Trade Outlook Report noted that these imbalances often emerge from economic specialisation — for instance, a nation strong in services may maintain a surplus in services trade while running a deficit in goods, as seen in India’s trade relations with the US.
- India enjoys a surplus in goods exports to the US, while the US maintains a services trade surplus with India. Ignoring this balance, the Trump administration imposed 25% retaliatory tariffs and compounded India’s strain by adding another 25% duty on Russian oil imports.
- The WTO further stated that while trade policies can marginally influence overall imbalances, macroeconomic variables have a far greater impact.
- Although India faces penalties for importing Russian oil and maintaining a goods trade surplus — which, according to the WTO, is an economic normality — China seems more strategically prepared to handle US trade pressure.
- While China’s exports to the US have dipped, its trade with ASEAN nations and other regions has increased significantly following the American tariffs.
- Moreover, China’s restrictions on critical mineral exports appear to be a long-term strategic move. A study by MUFG Research (Japan) suggests that these export controls were meticulously planned, given their scope and precision.
- Recognizing the rising global importance of such minerals, India too initiated proactive measures. The government’s National Critical Minerals Mission, announced last year, aims to secure essential mineral resources from both domestic deposits and overseas partnerships — though its outcomes may take years to materialize
1.“Securing access to critical minerals is crucial for India’s economic security, energy transition, and strategic autonomy.”
In this context, discuss the objectives and significance of the National Critical Minerals Mission (NCMM). Examine the challenges India faces in building a resilient critical minerals value chain, both domestically and globally. (250 words)
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Note: This is Model not a Model Answer Instructions this is only a reference
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Answer (C)
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