BRICS Opposes EU's Carbon Border Adjustment Mechanism

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Key takeaways

The 12th BRICS Environment Ministers' Meeting in New Delhi condemned the EU's CBAM as a protectionist trade barrier.
The CBAM policy enters its final financial phase on January 1, 2026, covering six carbon-heavy industrial sectors.
Iron and steel make up ~90% of India's CBAM-exposed exports to the EU, facing an extra tariff burden of 15%-20%.
BRICS members argue that the unilateral carbon tax violates CBDR principles established under the UNFCCC.
India can reduce tariff impacts by building its Carbon Credit Trading Scheme and expanding green steel production.

The 12th BRICS Environment Ministers' Meeting took place in New Delhi under India's chairship.
Ministers adopted a joint statement criticizing the European Union's Carbon Border Adjustment Mechanism (CBAM) as a unilateral and discriminatory trade barrier.

The CBAM is a major climate trade policy created by the European Union to price carbon on imported goods.
The policy enters its full financial phase on January 1, 2026, following a transitional reporting period from 2023 to 2025.
It aligns the carbon price paid by foreign exporters with the price paid by domestic European companies under the EU Emissions Trading System (EU ETS).

The system targets six heavy industrial sectors: iron and steel, aluminium, cement, fertilisers, hydrogen, and electricity.
Importers must calculate and submit verified direct manufacturing emissions under Scope 1 and indirect power emissions under Scope 2.
Importers must purchase CBAM certificates tied directly to weekly price averages from the EU ETS.
If an exporter pays an official carbon price in its home country, the EU deducts that exact amount from the final tax bill.

The policy stops carbon leakage by preventing EU firms from shifting production to countries with weaker green laws.
It protects domestic European factories from being undercut by cheaper imports while official free carbon allowances phase out.
The EU uses market access to encourage trading partners to switch to cleaner technologies like green hydrogen.
This tax supports the European Green Deal target to cut net emissions by 55% by 2030.
Sales from carbon certificates will raise funds for European clean technology investments.

Developing nations face high financial burdens because iron and steel account for ~90% of India's CBAM-exposed exports to the EU.
Indian steel generates 2.5 tons of carbon per ton compared to the EU benchmark of 1.8 tons.
Heavy reliance on coal power increases indirect emissions, adding an estimated tariff burden of 15%-20% on steel and 30%-40% on aluminium.
BRICS nations state that CBAM violates the principle of Common But Differentiated Responsibilities (CBDR) under the UNFCCC and the Paris Agreement.
High compliance and audit costs create severe trade barriers for small and medium businesses.
The tax forces companies to split production lines by sending green goods to Europe and high-carbon goods elsewhere.

Developing countries should challenge CBAM at the World Trade Organization (WTO) under GATT Articles I, III, and XX.
Nations must establish local carbon markets like India's Carbon Credit Trading Scheme to keep tax revenues at home.
Governments and industries should invest in green steel using green hydrogen and electric arc furnaces.
Developing nations must demand that wealthy countries fulfill pledges ahead of COP31 to triple adaptation funding by 2035.

The CBAM policy blends climate goals with international trade rules in a unprecedented way.
While the EU views the measure as essential for climate protection, developing nations view it as protectionist.
Balancing trade fairness requires domestic carbon pricing, cleaner industrial practices, and reliable climate finance from developed nations.