Alarm bells are ringing in Delhi: there is a rumour that the European Union proposes to levy a carbon tax on imports from India. The excuse would be that the EU, together with other signatories to the Kyoto treaty, has done much to cut carbon emissions, even at the expense of its industries. India, however, did not sign the Kyoto treaty, and has gone about merrily increasing its carbon emissions. It saved money by not spending on carbon-saving technologies. Its industries have therefore gained an unfair advantage, and only deserve to be punished. When it heard of this threat, the ministry of commerce ordered the Indian Institute of Foreign Trade to produce a position paper. This paper has argued that if the EU imposes a carbon tax on Indian goods, India should take a complaint of breach of national treatment to the World Trade Organization. The principle of national treatment requires that a country must treat goods from other countries in the same way as it treats its own goods. This rule is not absolute. Obviously, many countries impose taxes on imports that they do not levy on their own production. This has been all right with WTO as long as the tariff did not exceed the bound rate if any