BRICS nations oppose EU's Carbon Border Tax and demand enhanced climate financing
2-minute summary
At the 12th BRICS Environment Ministers' Meeting held in New Delhi under India's chairship, BRICS member nations jointly opposed unilateral and protectionist trade measures disguised as climate action, specifically targeting the European Union's Carbon Border Adjustment Mechanism (CBAM). The bloc criticized CBAM as discriminatory and punitive, arguing that it undermines developing nations' efforts to achieve sustainable development and climate resilience. The EU's CBAM imposes a carbon tariff on carbon-intensive imports such as iron and steel, aluminium, cement, fertilisers, hydrogen, and electricity to prevent 'carbon leakage'. For India, the mechanism poses significant challenges as iron and steel represent roughly 90% of its CBAM-exposed exports to the EU. Alongside trade concerns, BRICS demanded a substantial scaling up of adaptation finance from developed countries. They urged developed nations to deliver new, predictable, and grant-based climate funding without aggravating debt burdens, highlighting the commitment to triple adaptation finance by 2035 ahead of the COP31 climate negotiations.
Why it's in the news
The 12th BRICS Environment Ministers' Meeting in New Delhi issued a joint statement condemning the EU's Carbon Border Adjustment Mechanism (CBAM) as a protectionist barrier and demanding an urgent scale-up of grant-based adaptation finance for developing countries ahead of COP31.
Background and context
The European Union introduced the Carbon Border Adjustment Mechanism (CBAM) as part of its 'European Green Deal' to equalize the price of carbon paid for domestic production with that paid for imported goods, thereby addressing 'carbon leakage'. Developing nations, including India, South Africa, and Brazil, have consistently argued that unilateral carbon border taxes violate the core principles of the UN Framework Convention on Climate Change (UNFCCC), particularly Common But Differentiated Responsibilities and Respective Capabilities (CBDR-RC), and run counter to World Trade Organization (WTO) non-discrimination principles. Simultaneously, climate negotiations have seen an enduring imbalance: while mitigation efforts attract the bulk of global climate funding, adaptation finance—essential for developing nations vulnerable to extreme weather events—remains severely underfunded, prompting calls to triple adaptation funding by 2035.
Constitutional provisions
- Article 48A — Directs the State to protect and improve the environment and safeguard forests and wildlife.
- Article 51(c) — Directive Principle encouraging the State to foster respect for international law and treaty obligations.
- Article 253 — Empowers Parliament to enact legislation for implementing international agreements and treaties.
Committees and reports
- UNEP Adaptation Gap Report — Highlights the massive shortfall in international public adaptation finance flows to developing countries.
Government schemes
- National Adaptation Fund for Climate Change (NAFCC) — Supports concrete adaptation activities in states/UTs vulnerable to climate change impacts.
- Carbon Credit Trading Scheme (CCTS) — Domestic carbon market framework to decarbonize Indian industries and enhance global competitiveness.
International organisations
- BRICS — Intergovernmental group acting as a unified voice for the Global South against unilateral climate-trade measures.
- UNFCCC — Primary multilateral forum governing global climate negotiations and climate finance targets.
- World Trade Organization (WTO) — Multilateral body governing trade rules; central to disputes regarding whether CBAM constitutes an illegal tariff barrier.
Previous UPSC questions on this theme
- Mains GS-1 2023 — Discuss the consequences of climate change on the food security in tropical countries.
Mains practice: Examine how unilateral carbon border adjustments like the EU's CBAM challenge the principle of Common But Differentiated Responsibilities (CBDR-RC). What strategies should India adopt to safeguard its export competitiveness?
The European Union's Carbon Border Adjustment Mechanism (CBAM) imposes a carbon price on imported carbon-intensive goods (e.g., steel, aluminium, cement). While aimed at preventing 'carbon leakage', it has sparked significant resistance from developing economies.
• Challenge to CBDR-RC: Under the UNFCCC, CBDR-RC acknowledges differing historical emissions and developmental capacities. CBAM imposes uniform carbon standards on developing countries without accounting for their lower historical per-capita emissions or economic constraints.
• Non-Tariff Trade Barrier: By equalizing domestic and foreign carbon costs unilaterally, it bypasses multilateral negotiations under the UNFCCC and potentially violates WTO rules on non-discrimination.
• Export Impact on India: High-carbon sectors like iron and steel account for nearly 90% of India's CBAM-exposed exports to the EU, threatening market share and revenues of domestic manufacturers.
Strategic responses for India:
• Multilateral Diplomacy: Build coalitions through platforms like BRICS, BASIC, and the G77 to challenge unilateral border adjustments at the WTO and COP forums.
• Domestic Carbon Pricing: Operationalize the domestic Carbon Credit Trading Scheme (CCTS) so that carbon payments are collected domestically rather than ceded as taxes to the EU.
• Industrial Decarbonization: Accelerate initiatives such as the National Green Hydrogen Mission, scrap-based steel making, and CCUS adoption.
• Bilateral Engagement: Negotiate mutual recognition of carbon accounting standards and exemptions for MSMEs during FTA talks with trade partners.
Addressing climate change requires inclusive, multilateral cooperation rather than unilateral economic measures that jeopardize the sustainable development of the Global South.
Prelims practice questions
Q1. Which of the following sectors are covered under the European Union's Carbon Border Adjustment Mechanism (CBAM)? 1. Iron and Steel 2. Aluminium 3. Textiles 4. Fertilisers 5. Electricity Select the correct answer using the code given below:
- 1, 2, 4 and 5 only
- 1, 2, 3 and 4 only
- 2, 3 and 5 only
- 1, 2, 3, 4 and 5
Answer: A. The initial scope of the EU's CBAM covers six carbon-intensive sectors: iron and steel, aluminium, cement, fertilisers, electricity, and hydrogen. Textiles are not currently covered under CBAM.
Q2. Consider the following statements regarding Climate Finance: 1. Mitigation finance aims to reduce or prevent greenhouse gas emissions. 2. Adaptation finance focuses on assisting communities and infrastructure in coping with the unavoidable impacts of climate change. 3. Historically, international climate finance flows have been heavily skewed toward adaptation over mitigation. Which of the statements given above is/are correct?
- 1 and 2 only
- 2 and 3 only
- 1 and 3 only
- 1, 2 and 3
Answer: A. Statements 1 and 2 are correct. Statement 3 is incorrect because, historically, the majority of global climate finance has been directed toward mitigation (e.g., renewable energy projects), while adaptation has received a significantly smaller share.
Q3. In the context of international climate policy, what does the term 'Carbon Leakage' refer to?
- The unintentional release of methane during natural gas extraction.
- The physical leakage of sequestered carbon dioxide from underground storage sites.
- The loss of carbon sequestration capacity due to deforestation in tropical regions.
- The relocation of carbon-intensive production from countries with strict climate policies to countries with laxer rules.
Answer: D. 'Carbon leakage' occurs when businesses in countries with stringent emissions reduction policies transfer carbon-intensive production to other countries with less stringent constraints, leading to no net reduction in global emissions.
Revision flashcards
- What is the Carbon Border Adjustment Mechanism (CBAM)? A policy tool by the EU that levies a carbon tariff on imported carbon-intensive goods (e.g., steel, cement, aluminium, fertilisers, hydrogen, electricity) to level the playing field and prevent carbon leakage.
- Why do developing nations oppose CBAM under UNFCCC norms? They argue CBAM violates the principle of Common But Differentiated Responsibilities and Respective Capabilities (CBDR-RC) and acts as a unilateral, protectionist trade barrier.
- Which Indian export sector is most vulnerable to the EU's CBAM? Iron and steel, which accounts for approximately 90% of India's exports to the EU that fall within the scope of CBAM.
- What is the difference between Climate Mitigation and Climate Adaptation? Mitigation focuses on reducing greenhouse gas emissions (e.g., renewables), whereas adaptation focuses on building resilience to inevitable climate impacts (e.g., sea walls, drought-resistant agriculture).
- What key demand did BRICS raise regarding adaptation finance? They demanded that adaptation finance be new, additional, predictable, accessible, primarily grant-based/concessional, and aligned with targets to triple funding by 2035.