Undermining Fairness

While developed countries may attempt to subtly obfuscate the North-South fault-line by arguing that every country has more or less equal responsibility towards the global atmospheric commons, yet, it is now, more than ever, that the construct of the global South has hardened and significantly assumed a distinctive identity in global politics

- GARIMA MAHESHWARI

In a landmark move, the European Union (EU) has approved a bill which also includes the much-anticipated Carbon Border Adjustment Mechanism (CBAM). CBAM is a carbon border tax on imports entering the EU from other countries.

The idea behind imposing such a tax is to supposedly level the playing field for various industries and ensure that nonpolluting industries inside the EU are not at a competitive disadvantage vis-à-vis polluting industries located outside of EU, and to also prevent carbon leakage by ensuring that industries within the EU do not relocate to other jurisdictions which do not have stringent carbon taxes that need to be paid. The CBAM is expected to be implemented from 2026 onwards, much to the dissatisfaction of developing countries.

It is coming at a time when the United States (US) has already implemented its Inflation Reduction Act (IRA) which provides around $370 billion in taxbreaks, subsidies, manufacturing conditions and incentives to the clean energy sector.

The IRA, instead of taking a top-down approach like the EU CBAM, has, nonetheless, ended up achieving the similar outcomes which the EU CBAM is expected to do viz. wean away investments in clean energy manufacturing to the U.S. It has been criticized by the leading EU economies like France and Germany for spoiling the level-playing field in the clean energy sector through a supposedly protectionist move.

With the transatlantic alliance riven by such tensions and with the field of climate action vulnerable to increasing instances of trade competition, it is worth assessing the future of the principles underlying the global climate regime and cooperation. Here, the following fundamental arguments become significant: