The European Union's planned carbon tax on energy-intensive goods imported from developing countries is in contravention of the spirit of the Paris Agreement, India said on Monday.

The government's 'Economic Survey 2023-24' highlighted that even as developed countries prepare to impose a carbon tax on imports, they are ramping up energy demand like never before due to their obsession with artificial intelligence (AI).

"Developing nations are also being threatened with a carbon tax at the border, in full negation of the spirit of common but differentiated responsibilities and respective national capabilities that was supposed to have undergirded the Paris Agreement," the report on the state of the economy in the previous year said.

This means that India not only has to deal with climate change and undertake energy transition but also confront the protectionism of developed countries, it said.

The European Union is on course to implement its Carbon Border Adjustment Mechanism (CBAM), and both the United Kingdom and the United States are in different stages of imposing their versions of it in due course.

The EU argues that this mechanism creates a level playing field for domestically manufactured goods, which must adhere to stricter environmental standards, and help reduce emissions from imports.

However, other nations, particularly developing countries, worry that this would harm their economies and make it too expensive to trade with the bloc.

The move has also sparked debate at multilateral forums, including UN climate conferences, with developing countries arguing that, under UN climate change rules, countries cannot dictate how others should reduce emissions.

According to a report by the independent think tank Centre for Science and Environment (CSE), CBAM will impose an additional 25 per cent tax on carbon-intensive goods, such as iron, steel, cement, fertilisers, and aluminium, exported from India to the EU.

Based on data from the past three years, this tax burden would represent 0.05 per cent of India's GDP.

"It would be a comedy if it were not real and tragic. Even as developed nations prepare to impose a carbon tax at the border on imports coming into their countries laden with carbon, they are ramping up energy demand like never before, thanks to their obsession with letting Artificial Intelligence (AI) guide, take over and dominate natural intelligence," the Economic Survey read.

"One of the leading global technology companies promised to achieve Net Zero by 2030 at the turn of the decade. But the race to dominate the emerging technology of Artificial Intelligence has caused its emissions to be higher by 30 per cent by 2023," it said.

In a research report published in April, analysts at Goldman Sachs wrote that the demand for power in the United States would experience growth not seen in a generation, thanks to AI, and that "transmission, one of the major bottlenecks for clean energy transition, and the addition of data centres and AI could exacerbate this".

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