Belém, Brazil – At the opening of the COP30 climate conference in Belém, Brazil, India voiced strong opposition to the European Union's proposed Carbon Border Adjustment Mechanism (CBAM), labeling it a protectionist measure that contradicts the spirit of the UN Framework Convention on Climate Change (UNFCCC). Speaking on behalf of the BASIC (Brazil, South Africa, India, and China) group and the Like-Minded Developing Countries (LMDC) group, India argued that the CBAM undermines multilateral cooperation and places an unfair burden on developing economies.

The EU's CBAM, slated for full implementation in 2026 after a transitional phase that began in 2023, will impose a tariff on carbon-intensive goods imported into the EU, such as steel, aluminum, cement, fertilizers, electricity and hydrogen. The mechanism is designed to equalize the carbon impact between producers within the EU, who are subject to the EU Emissions Trading System (ETS), and those in countries with less stringent environmental regulations. EU importers will be required to purchase certificates to cover the embedded emissions of the goods they import. The cost of these certificates will be linked to the price of EU allowances under the ETS.

India and other developing nations contend that the CBAM is discriminatory and acts as a trade barrier. They argue that it will disproportionately affect their businesses, particularly micro, small, and medium-sized enterprises (MSMEs) in sectors like steel and aluminum, due to the embedded emissions in their products. A key point of contention is the CBAM's potential violation of the principle of "common but differentiated responsibilities and respective capabilities" (CBDR-RC), a cornerstone of the UNFCCC. This principle acknowledges that while all countries have a shared responsibility to address climate change, developed countries should take the lead due to their historical contributions to greenhouse gas emissions and their greater financial and technological capacity.

India has long maintained that unilateral measures like the CBAM circumvent broader international forums and shift the onus onto developing nations. Ajay Seth, India's economic affairs secretary, has previously called the CBAM "unfair and unacceptable," stating that the solutions offered by the EU do not work for a developing economy like India. India is the world's third-largest emitter of CO2. To counter this effect, a carbon tax has been implemented primarily aimed at reducing emissions and curbing the use of fossil fuels like coal, gas, oil, etc.

The EU defends the CBAM as a necessary tool to prevent "carbon leakage," where companies relocate production to countries with weaker environmental standards to avoid emissions costs. They also state that the CBAM is designed carefully so that it is compatible with WTO rules, applying the same carbon price on imported goods as on domestic EU producers. However, critics like Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), suggest that the CBAM could result in Indian products attracting a high tax in the EU, impacting India's export competitiveness.

The debate surrounding the CBAM highlights the complex interplay between climate action, trade, and development. While the EU aims to incentivize cleaner production globally and achieve its ambitious climate targets, developing countries fear that the CBAM will impede their economic growth and undermine the principles of equity enshrined in the UNFCCC. Some experts have suggested that the EU dedicate a portion of CBAM revenues to support decarbonization efforts in developing countries.

As COP30 progresses, the issue of climate finance is expected to be a major point of discussion. Developing nations are seeking increased financial support from developed countries to help them adapt to the impacts of climate change and transition to low-carbon economies. The "Baku to Belém Roadmap," detailing how to deliver $1.3 trillion annually for developing countries to implement promised climate actions, has been proposed as a reference for these discussions. India's challenge to the CBAM underscores the need for inclusive and equitable climate policies that consider the diverse circumstances and developmental priorities of all nations, and adhere to the core principles of the UN climate convention.