BRICS Criticism of the European Union’s Carbon Border Adjustment Mechanism (CBAM)

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PRERNA FOR IAS

         Mehnat Aapki, Guidance Humari

         Roz ki Prelims Practice — Experts ke Saath

BRICS Criticism of the European Union’s Carbon Border Adjustment Mechanism (CBAM)

Context

The European Union’s Carbon Border Adjustment Mechanism (CBAM) has emerged as an important issue in global climate and trade negotiations. At the 12th BRICS Environment Ministers’ Meeting held in New Delhi in August 2026 under India’s BRICS Chairship, member countries expressed concern over unilateral climate-linked trade measures. BRICS countries have argued that such measures can impose disproportionate costs on developing economies and may function as protectionist barriers under the guise of environmental regulation.

What is CBAM?

CBAM is a mechanism introduced by the European Union to impose a carbon price on selected carbon-intensive goods imported into the EU. Its objective is to ensure that imported goods bear a carbon cost comparable to that paid by European industries under the EU Emissions Trading System (EU ETS). The transitional phase began on 1 October 2023, during which importers were primarily required to report embedded emissions. The definitive regime became applicable from 1 January 2026, introducing financial obligations through CBAM certificates.

Products Covered

The mechanism initially covers major carbon-intensive sectors such as iron and steel, aluminium, cement, fertilisers, hydrogen and electricity. These sectors were selected because their production generally involves high greenhouse-gas emissions and therefore carries a significant risk of carbon leakage.

Historical Background and Objectives

CBAM forms part of the European Union’s broader European Green Deal and “Fit for 55” package, which seeks to reduce the EU’s net greenhouse-gas emissions by at least 55% below 1990 levels by 2030. The EU argues that without such a mechanism, European companies facing stringent carbon regulations may shift production to countries with weaker climate standards, a phenomenon known as carbon leakage. CBAM therefore aims to maintain a level playing field between European producers and foreign suppliers.

Stand of India and BRICS

India has expressed reservations about unilateral carbon-border measures and has emphasised that international climate action must respect the principle of Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC). India maintains that developed and developing countries cannot be subjected to identical transition burdens because their historical contribution to greenhouse-gas emissions and their developmental capacities are different. BRICS countries have consequently raised concerns that CBAM could amount to “green protectionism” and negatively affect sustainable trade and development.

Impact on India

India may be particularly affected because important exports to the European Union, especially iron, steel and aluminium, are relatively carbon-intensive. Indian steel production still relies considerably on coal-based processes and blast-furnace technology, which may result in higher embedded emissions. Consequently, exporters could face increased compliance costs and reduced competitiveness in European markets. Smaller firms and MSMEs may face additional difficulties because measuring, verifying and reducing emissions requires significant financial and technological investment.

India’s Preferred Approach

India has advocated a more cooperative international approach based on climate finance, affordable technology transfer, capacity-building and multilateral negotiations. It argues that developed economies should help developing countries adopt cleaner technologies instead of relying predominantly on trade penalties. India also supports discussions on climate-related trade measures through established multilateral institutions such as the WTO and UNFCCC.

Current Status

As of September 2026, the definitive phase of EU CBAM is operational. The mechanism is therefore no longer merely a reporting arrangement but has begun creating direct financial and compliance obligations. For India, CBAM presents both a challenge and an incentive: it can raise export costs in the short term, but it may also accelerate investment in green steel, renewable energy, energy efficiency, low-carbon manufacturing and credible carbon-accounting systems. The larger international debate continues to centre on balancing climate ambition with trade fairness, developmental equity and climate justice.

Analytical Questions

1. Do you think CBAM is mainly a climate measure or a trade protection measure?

Answer: It is probably both. The EU has a genuine concern about carbon leakage. But CBAM also protects European firms that face high carbon costs. The real test is fairness. If developing countries are penalised without finance and technology support, CBAM can look more like protectionism than climate cooperation.

2. If India strongly opposes CBAM, should it still change its industrial policies because of it?

Answer: Yes. India can oppose unfair parts of CBAM and still use it as a signal to modernise industry. Cleaner steel, renewable power and better carbon accounting will help Indian exports in many markets. The aim should not be to adjust only for Europe, but to make Indian industry globally competitive.

3. How can India protect its exporters, especially MSMEs, from the cost of CBAM?

Answer: India should help firms measure emissions, improve energy efficiency and access cleaner technology. MSMEs need common testing facilities, low-cost finance and technical support. Government can also negotiate mutual recognition of carbon data. Without such support, small firms may lose market access even when their products are otherwise competitive.

4. Is India’s argument based on CBDR-RC fully valid in a trade matter like CBAM?

Answer: India’s argument has moral and climate-policy strength because developed countries caused a larger share of historical emissions. But trade rules also require non-discrimination. So India must combine the equity argument with legal and economic arguments. It should show clearly how CBAM may create unequal burdens or hidden protection.

5. What should be India’s long-term response if carbon-border taxes spread to other developed economies?

Answer: India should prepare for a world where carbon content affects trade. It needs reliable emissions data, greener electricity, cleaner industrial technology and a domestic carbon market with credible standards. Diplomatically, India should push for common global rules. Strategically, it should reduce carbon intensity before such measures become widespread.