Meanwhile, the European Union (EU) plans to implement its own CBAM beginning January 1, 2026. Weeks on and this move has sent shockwaves, raising significant concerns among all key economies including India and China. Both countries use a large share of their coal in steel production. They are concerned about the negative impact of CBAM on their equally carbon-intensive steel sectors. Both New Delhi and Beijing have joined forces to challenge the proposed carbon tariff. They are going a step further by sounding the alarm on potential trade barriers that might arise from enforcing it.
The CBAM addresses carbon leakage through border tariffs. It has a major impact on imported goods from countries with lower environmental standards. This mechanism has been a point of contention in India and China. The steel industries in both countries are crucial to their respective economies and are most directly affected by the new rules. Both countries say that the CBAM could severely disrupt an equitable playing field in international trade. This would exacerbate already severe challenges facing their steel sectors.
At the recent United Nations climate talks, India and China doubled down on their criticism of the CBAM. In spite of significant geopolitical tensions, this was a notable point of cooperation between the two countries. Their leaders expressed fears that the mechanism would usurp these economic growth and development opportunities in their communities. The roundtable discussions at the UN created a unique opportunity for each country to directly address one another’s grievances. They highlighted the negative long-term impacts that CBAM would have on their economies.
India’s and China’s steel sectors have been described as particularly hard to abate, mainly because of their use of carbon-intensive, coal-powered production methods. These countries are working to pursue equitable industrial development while maintaining environmental stewardship. They worry that if they implemented CBAM, that could undermine their actions. The EU’s tariffs will increase production costs for steel producers. Consequently, these firms find it difficult, if not impossible to compete in increasingly competitive global markets.
Below the surface, lie serious issues beyond the economic impacts that India and China fear. Further, they explain why a fair approach to addressing climate change is crucial. This new focus should not be used to re-use strict measures on emerging nations while allowing developed countries to maintain their manufacturing upper hand. Their unified opposition to CBAM is an interesting opening to the larger conversation on how trade may or may not work with environmental policy.