The world needs to burn less carbon. But while many countries have moved to limit the emissions produced within their own borders, some are also grappling with the emissions produced by their imports. The resulting policies walk a line between environmentalism and protectionism \u2014 and may end up punishing some of the Global South countries most impacted by, yet least responsible for, climate change.<\/p>\n
This year, the EU began imposing the world\u2019s first carbon border adjustment mechanism (CBAM): essentially a tariff on imported products that have carbon-intensive production, matching the EU\u2019s existing internal carbon restrictions that put a price on carbon emissions. Following a three-year transition period when importers reported their emissions, 2026 marked the start of the carbon tax \u2014 and the renewal of a debate on equity in climate justice.<\/p>\n
CBAM proponents have touted it as a necessary measure to advance environmental objectives, leading to similar proposals in the United Kingdom<\/a> and the United States.<\/a> Its critics, on the other hand, have expressed concern<\/a> about economic consequences that will be primarily borne by developing countries.<\/p>\n Green Protectionism<\/b><\/p>\n In its current phase, CBAM targets specific high-emitting sectors: cement, aluminium, fertilizers, iron and steel, hydrogen, and electricity. The carbon tax operates in accordance with the EU Emissions Trading System (EU ETS), a form of cap and trade applied within the EU.<\/p>\n The EU\u2019s cap and trade system puts a maximum cap on carbon emissions and has emitters purchase allowances to cover emissions, which can then be traded by allowance holders. With CBAM, EU importers must purchase CBAM certificates at the price of EU ETS allowances, effectively applying the existing EU standard for the cost of emissions onto non-EU states.<\/p>\n In the context of the EU\u2019s climate goals, CBAM primarily serves to address carbon leakage,<\/a> where emissions are directed to countries with fewer environmental regulations instead of being meaningfully reduced \u2014 either by businesses offshoring carbon-intensive processes or by increasing high-emission imports to avoid costs incurred by adhering to domestic emission-cutting efforts.<\/p>\n As a result, CBAM has also been promoted as a measure to protect the competitiveness of industry in the EU.<\/a> In this sense, CBAM is as much a matter of trade policy as it is environmental, with the former becoming the main target of international condemnation. The current structure of CBAM as a protectionist policy produces a zero-sum relationship between the economic competitiveness of the EU and exporting countries, disproportionately harming those in the Global South.<\/p>\n Penalizing Poor Countries<\/b><\/p>\n CBAM presents exporting countries with a choice: reduce production emissions or face sharp economic consequences. The problem here is not pressuring other countries to commit to reducing emissions, but that the application of CBAM does not acknowledge varying capacities to accomplish this.<\/p>\n Penalizing countries that do not have the financial means to rapidly transition to lower-emission infrastructure, and consequently reduce production emissions, only perpetuates the economic inequality that restricted them to begin with.<\/p>\n There are massive infrastructure costs<\/a> for transitioning to low-emission technology, which developing countries have difficulty accommodating. And the Global North hasn\u2019t made it easy to access this technology either. Environmentally sustainable technologies get locked behind patents<\/a> with costly licensing and limited resources to implement.<\/p>\n There are further logistical issues<\/a> that complicate the adjustment to CBAM for all exporters, such as calculating and reporting emissions, which pose a particular threat to smaller firms. While enforcing this may be a headache for wealthy and low-income countries alike, the financial strain felt by poorer countries is further compounded. Exporters could respond by exacting retaliatory policies<\/a>, but poorer countries have less leverage to do this effectively.<\/p>\n CBAM also incentivizes<\/a> exporting countries to strengthen their own domestic carbon markets to avoid incurring a fee through CBAM once products reach importers. CBAM stipulates<\/a> that carbon prices paid prior to importing can be deducted, meaning countries with an existing robust emissions trading system can better mitigate potential losses. China, for example, can reduce losses by 30-60 percent<\/a> under its carbon pricing scheme. Countries with weaker systems or none at all, however, are left at a steep disadvantage<\/a>.<\/p>\n Trading Aid for Tariffs<\/b><\/p>\n Imposing a tariff in the name of climate justice is not only discriminatory, but deeply hypocritical for the Global North.<\/p>\n Developed countries, including both the EU and its member states, have failed<\/a> to deliver on their commitments to climate finance under the Copenhagen Accord, which could have supported the financial burden of transitioning to green technologies. Developed nations pledged to provide $100 billion annually to support developing countries in combating climate change. Though they agreed to hit this target by 2020, this promise has been left unfulfilled year by year.<\/p>\n Even after the OECD reported<\/a> that the $100 billion goal was finally met in 2022, donor countries received backlash<\/a> for providing loans and not grants. EU member states France, Austria, and Spain heavily rely on loans<\/a> as a form of financing, which risks debt-trapping developing countries and jeopardizes the long-term maintenance of a green transition.<\/p>\n Framing CBAM as a crucial measure to uphold the Paris Agreement also reflects selective adherence to international agreements. Opponents have accused CBAM of violating Article 3.5 <\/a>of the UNFCCC, which discourages climate initiatives that serve as a \u201cdisguised restriction on international trade,\u201d especially unilateral measures. Both informal challenges and formal disputes <\/a>have been brought against the EU at the WTO, following similar criticisms alleging that CBAM violates WTO rules<\/a> against discriminatory practices.<\/p>\n The EU\u2019s CBAM comes at a time of rising protectionist trade policy among states in the Global North. What distinguishes CBAM is its green veneer, the hallmark of green protectionism<\/a>. As the EU fully rolls out CBAM, international actors look to carbon border adjustments as a model for climate policy \u2014 and the U.S. has already taken note.<\/p>\n A Bad Model for Climate Action in the U.S.<\/b><\/p>\n Carbon border adjustments have historically had bipartisan support<\/a> in the United States.<\/p>\n Politicians have made no secret of the geopolitical motivations behind that support. Democratic Senator Chris Coons described the policy as a tool \u201cthat will bring us closer to our allies and disadvantage some of our adversaries,\u201d while Republican Senator Kevin Cramer has called it an \u201cAmerica-first climate policy\u201d that \u201cDonald Trump should love.\u201d Observers have noted that CBAM takes after<\/a> Trump\u2019s tariff policies, just with better marketing.<\/p>\n While there\u2019s been nothing \u201cgreen\u201d about the Trump administration\u2019s aggressive tariff regime, the U.S. also has a history with green protectionism.<\/p>\n Though the Inflation Reduction Act (IRA) under Biden was the largest U.S. climate investment<\/a> in history, it was also \u201cwidely believed to be a part of the U.S. strategy to weaken China\u2019s dominance in the green economy,\u201d<\/a> World Finance reports. The IRA greatly privileged U.S. production<\/a> by providing tax credits for electric vehicles that are assembled in North America using U.S.-sourced critical minerals.<\/p>\n The IRA, similarly to CBAM, was met with global backlash \u2014 and also pushed other states to adopt<\/a> their own protectionist policies. (The GOP\u2019s \u201cBig Beautiful Bill\u201d subsequently ended the IRA\u2019s tax credits for electric vehicles<\/a>, although it preserves some favorable tax treatment<\/a> for U.S.-made vehicles overall.)<\/p>\n