The BRICS nations have recently condemned the European Union’s Carbon Border Adjustment Mechanism (CBAM). At their 2025 summit in Rio de Janeiro, they labelled CBAM as a unilateral, protectionist trade barrier. This mechanism imposes import duties on goods from countries with higher carbon emissions than EU standards. Developing countries argue that CBAM undermines their economic growth and violates international agreements on trade and climate action.
What Is the Carbon Border Adjustment Mechanism?
CBAM is an EU policy introduced in 2023. It taxes imports based on the carbon footprint of their production. If goods are produced with higher emissions than allowed in Europe, importers must buy carbon certificates. This aims to prevent “carbon leakage,” where industries move production to countries with lax emission rules. The EU plans a full implementation of CBAM from 2026 after a transitional phase from 2023 to 2025.
Rationale Behind CBAM
The EU claims CBAM ensures fair competition between domestic and foreign producers. It encourages cleaner production globally by making carbon-intensive goods more expensive. This tool supports Europe’s climate goals while protecting its industries from unfair competition. CBAM aligns with World Trade Organization rules and EU international obligations, according to the European Commission.
Concerns of Developing Countries
India, China, and other developing nations see CBAM as discriminatory and unfair. They argue it violates the Paris Agreement’s principles that protect them from adverse economic impacts of climate policies. CBAM ignores the principle of common but differentiated responsibilities that treats developing countries differently in climate action. These countries fear CBAM will reduce their export competitiveness, especially in key sectors like steel and cement.
International Reactions and Diplomacy
Developing countries have raised CBAM at multiple international forums, including UN climate conferences. The BASIC group (Brazil, South Africa, China) has opposed it strongly, calling for solidarity against such unilateral measures. Despite opposition, the EU has maintained its stance. Attempts to discuss CBAM’s trade implications at COP29 in Baku were delayed and ultimately sidelined due to disagreements.
Broader Impact on Global Trade and Climate Policies
CBAM is the most climate-linked trade barrier to date due to the EU’s large market share. Other countries like the UK and Canada may adopt similar measures. Non-tariff barriers related to climate, such as bans on products from illegal deforestation and incentives for clean technologies, are also rising. Climate change is accelerating protectionism intertwined with economic and strategic concerns, reshaping global trade dynamics.
Future Outlook
The expansion of CBAM’s product coverage is expected in coming years. Developing countries are likely to continue pushing back diplomatically. The growing use of climate-related trade measures calls for careful balancing of environmental goals with fairness in international trade and development needs.
Questions for UPSC:
- Critically discuss the impact of Carbon Border Adjustment Mechanisms on developing economies and international trade relations.
- Examine the principle of common but differentiated responsibilities under the Paris Agreement and analyse its significance in global climate negotiations.
- Estimate the role of non-tariff barriers in shaping global trade amidst climate change and economic security concerns.
- Point out the challenges and opportunities of integrating climate policies with international trade rules under the World Trade Organization framework.
