European Union (EU) officials at COP30 in Belém staunchly defended a sweeping carbon border tax that is poised to reshape global trade even after countries like India and other major economies decried the policy as unfair and protectionist.
The Carbon Border Adjustment Mechanism (CBAM), which will begin phasing in this year and become fully operative in 2026, aims to penalize countries whose industrial exports do not align with the EU’s decarbonization standards.
EU Climate Commissioner Wopke Hoekstra insisted that CBAM is not a punitive trade measure but a vital tool to prevent “carbon leakage” — the shift of carbon-intensive production to regions with looser environmental rules. He defended the gradual rollout and emphasized that it’s being deployed to incentivize cleaner manufacturing, not as a money-making tariff.
But India, whose heavy industries rely significantly on coal-fired energy, has strongly opposed the mechanism. According to reports, Indian steel and aluminum exporters could face border levies as high as 20–35% on their goods entering the EU.
The Financial Times has quoted EU officials rejecting India’s call for a blanket exemption, though they have suggested lower duties if New Delhi establishes a domestic carbon pricing framework.
CBAM covers sectors such as steel, cement, aluminum, fertilizers, electricity, and hydrogen — industries often implicated in carbon leakage
Economists argue that, while the mechanism could incentivize low-carbon production, it also risks sparking trade friction, particularly with emerging economies still grappling with development challenges.
As EU and Indian negotiators continue to wrestle with the issue, the CBAM has emerged as a flashpoint — one that tests whether climate ambition can dovetail with equitable trade policy.
Read more: EU Parliament Backs Plan To Simplify Carbon Border Adjustment Mechanism