EU’s Carbon Border Tax and the Global Pushback
- vidyarthee2021
- Jul 10
- 2 min read
The BRICS nations have strongly opposed the European Union’s Carbon Border Adjustment Mechanism (CBAM), labelling it as a unilateral and unfair trade barrier targeting exports from developing countries.
What is CBAM?
CBAM is a carbon border tax proposed by the European Union to impose a carbon price on imports of certain goods from countries with less stringent climate policies.
Aims to ensure that the carbon cost of imported goods is similar to that of EU-made goods.
Designed to prevent carbon leakage — the relocation of industries to countries with weaker emission norms.
Enforcement Timeline
Transitional Phase: 2023–2025 (only reporting required, no payments).
Full Implementation: Begins from January 1, 2026, where importers must pay a carbon fee.
Sectors Covered
Cement
Iron and steel
Aluminum
Fertilizers
Electricity
Hydrogen
Significance for the EU
Levels the playing field for EU manufacturers under the EU Emissions Trading System (ETS).
Encourages global transition to cleaner industrial processes.
Aligns with the European Green Deal aiming for net-zero emissions by 2050.
Concerns Raised by BRICS and India
Violates the Paris Agreement's CBDR principle (Common But Differentiated Responsibilities).
Acts as a disguised trade barrier under the guise of climate action.
Adversely impacts developing economies’ exports, especially India’s steel and aluminum sectors.
May trigger retaliatory tariffs and trade disputes at WTO.
UPSC-Relevant Points
CBDR is a core principle of international climate negotiations.
Carbon leakage is a key concern under international climate finance and trade policies.
India's response includes aligning domestic industries with green tech, carbon trading frameworks, and using WTO channels for fair trade practices.
UPSC Prelims MCQ
Q. With reference to the Carbon Border Adjustment Mechanism (CBAM), consider the following statements:
It is a global carbon tax framework mandated by the UNFCCC.
It aims to prevent carbon leakage from the EU.
It applies to exports of goods from EU countries to developing nations.
Which of the statements given above is/are correct?
A. 1 only
B. 2 only
C. 2 and 3 only
D. 1 and 3 only
Answer: B. 2 only
Explanation:
Statement 1 is incorrect: CBAM is an EU initiative, not mandated by the UNFCCC.
Statement 2 is correct: Preventing carbon leakage is the key objective.
Statement 3 is incorrect: CBAM applies to imports into the EU, not EU exports.
UPSC Mains Question (GS3 – Environment & Economy)
Q. "Carbon Border Adjustment Mechanism (CBAM) may pose a serious challenge to India’s trade competitiveness while promoting climate protectionism." Discuss in the context of India’s climate and trade policy.
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