Similarly, the European Union’s Carbon Border Adjustment Mechanism (CBAM) will go into effect on January 1, 2026. This implementation is troubling for large developing countries such as India and China. Both countries demonstrate a deep dependence on coal in their steel sectors, highly intensive in carbon emissions. They view this policy as a significant, unjustifiable new trade barrier that would have damaging effects on their economies.
Under the CBAM, carbon-intensive imports such as steel and cement will face tariffs. This step is the EU’s continuation of its ambitious plan to reduce greenhouse emissions in half by 2030 compared to 1990 levels. This mechanism is viewed as a key step in the EU’s bid to lay the groundwork for a global carbon pricing structure. Perhaps no other countries have been as vehemently opposed as India and China have been to the US and EU’s proposed politically toxic and economically harmful measure.
Most recently at COP 27 in Egypt last November, India and China escalated their alliance to fight the CBAM. The two countries have found common cause in opposition to the policy’s damage to their respective economies. They are indeed especially concerned, though, since both countries are greatly reliant on coal-fired industries. They make the case that the CBAM could unfairly harm their developing members’ steel industries, which are key to their long-term economic development.
The tensions surrounding the CBAM have underscored a broader conflict between the European Union and emerging economies over climate and trade policies. The EU leads the world in demanding strong actions to address climate change. At the same time, India and China are telling negotiators that these new rules could imperil their newfound economic development. They claim that the CBAM would undermine their global competitiveness. The higher costs that would suddenly be imposed on their exports would potentially be devastating to them.
Both India and China recently raised concerns over the CBAM’s ability to significantly distort global trade. Both countries, as some of the world’s largest steel producers, are concerned that the imposition of tariffs will adversely affect their ability to compete in global markets. They’re concerned that this would expose them to massive industrial job loss. The fear of these tariffs has created a high level of debate. What we’re hearing Support a more equitable approach to addressing climate change and ensuring economic resilience.