Trade On Emissions

EU's Carbon Border Adjustment Mechanism, a tariff on imports, is designed to protect European industries in the guise of climate action.

The carbon tariff would hurt developing countries' export earnings and shift the decarbonisation burden on them, while overlooking developed nations' climate responsibilities and green funding failures.

THE GLOBAL race to build a low-carbon economy is gaining momentum. But this much-needed push to reduce greenhouse gas (GHG) emissions has raised concerns about economic rivalry and trade protectionism. Under the guise of climate action, developed countries are trying to protect their domestic manufacturers from global competition while shifting their environmental responsibilities on others.

The European Union's (EU's) Carbon Border Adjustment Mechanism (CBAM) is a clear example of this. The initiative aims to impose a carbon tariff on imports of energy-intensive products, based on the GHG emissions generated during their production.

India, in its Economic Survey report released in July 2024, ahead of the Union Budget 2024-25, argues that CBAM and similar proposed measures from the US and the UK violate the Paris Agreement's principle of "Common but Differentiated Responsibilities", as developed countries shift the burden of climate finance from the Global North to the Global South through carbon taxes.

India's concerns are echoed by other developing nations. In June, South Africa condemned CBAM during the Ministerial Declaration for the High-Level Political Forum for Sustainable Development 2024, calling it an "extraterritorial, unilateral, coercive, and trade-distorting measure disguised as climate protection."