The European Union’s Carbon Border Adjustment Mechanism (CBAM) begins implementation on January 1, 2026. In turn, especially for the proposal’s impact on their large steel industries, India and China have made vigorous complaints. Both countries have a huge stake in carbon-intensive and coal-powered steel industries. They worry that this new, proposed carbon tariff would throw their developing economies into disarray and raise new barriers to trade.
The CBAM is designed to impose a carbon tariff on certain imported goods, particularly targeting industries that significantly contribute to greenhouse gas emissions. The EU now mandates that importers purchase carbon credits for their imported products. Broadly speaking, this is a smart and effective approach to tackle the carbon emissions from the industrial activities. New Delhi and Beijing, in particular, feel very adamantly that this measure unfairly penalizes countries such as theirs. In those countries, steelmaking is an important engine for economic growth.
At the latest United Nations climate talks, pushback from India and China over the CBAM was notably fierce. Currently, amid a war, its accompanying geo-political upheavals, and all ongoing tensions between the two nations, they’re in agreement in their critique of the mechanism. Both countries are understandably concerned that an aggressive implementation of the CBAM would jeopardize their steel industries. These industries are not only the bedrock of their economic health, they have been an incubator for their global trade relationships.
India’s steel sector has long been a backbone of its industrial landscape, while China’s steel industry is one of the largest in the world. The looming carbon tariff has raised alarms about potential job losses, increased production costs, and reduced competitiveness in international markets. The CBAM – which they argue could still substantially disrupt their economies if implemented as planned – is presented as a protectionist trojan horse.
The introduction of CBAM was not just another unilateral trade action against developing countries amid a climate crisis. The EU is framing the mechanism as an important new tool for countering climate change. Critics fear it would turn into a widespread protectionist tool, a major blow to principles of global trade. India and China’s joint opposition to CBAM illustrates the difficulty of reconciling international environmental goals with domestic developmental concerns.
As climate policy discussions advance by the day, both nations continue to double down on their opposition to the CBAM. This is what they’re calling for when they say we need just, equitable solutions to address the climate crisis. These solutions ought to preserve the livelihoods of millions of Americans who depend upon these endangered industries.