Criticism of CBAM as an excuse for inaction

In numerous stages, panels and press briefings in Dubai, Europe faces criticism for its Carbon Border Adjustment Mechanism (CBAM) – especially from the so-called BASIC countries (Brazil, South Africa, India, and China). The CBAM allegedly contradicts the principles of the Paris Climate Agreement of "equality and common but differentiated responsibilities". In other words, the main contributors to climate change – the industrialized nations – should not shift their responsibility to act onto weaker developing countries, even though all must work together to curb global warming.

The EU defends itself, considering the COP the wrong forum to discuss trade policy and reaffirms that the CBAM has been strictly designed according to WTO criteria. From EU sources, there is suspicion that the BASIC accusations hide a negotiation strategy. It is not clear what the BASIC countries want in return. Still, they may be seeking an excuse not to work on effective carbon pricing. EU negotiators also state that the issue does not come up in the negotiation rooms but is limited to public statements by BASIC government representatives.

CBAM also a topic at the global stocktake

The CBAM was introduced to prevent European producers, who will have to pay the European CO2 price in the future, from being disadvantaged on the international market. To avoid carbon leakage, imports of cement, iron and steel, aluminum, fertilizers and electricity from outside the EU will be subject to a carbon tariff equal to the EU CO2 price from 2026. Unless foreign producers also pay a carbon surcharge in their own country. For the EU, the CBAM is also a means of incentivizing carbon pricing in other EU countries.

The BASIC countries see CBAM as "sanctions on low-carbon products" restricting technological investments and green trade. A corresponding proposal is included in the latest draft of the most important document of COP28 – the global stocktake– on the insistence of these countries. Although the criticism is not directed only at the EU CBAM but also at the EU Deforestation Law and the US Inflation Reduction Act, the central accusation against Europe is that CBAM prevents particularly developing countries from implementing decarbonization measures for their industries. This is because export products become more expensive due to the carbon surcharge, violating WTO rules and the Paris Climate Agreement, as foreign producers are disadvantaged in the EU market.

CBAM treats everyone equally, but ...

The accusation of violating WTO rules is not new. It arose while EU lawmakers were still negotiating the exact design of CBAM. Therefore, various countries and parliamentary groups within the EU insisted on a legal text along the WTO rules of treating foreign and domestic products equally and treating all trading partners equally. The result: All importers into the EU internal market must pay the same fee for the direct greenhouse gas emissions of their products, as European producers do.

While CBAM does create a level playing field, according to Linda Kalcher, founder of the Brussels-based think tank Strategic Perspectives, "not everyone can play equally". Countries in the Global South understandably fear that CBAM will block their access to the EU internal market. For example, many African countries do not have the same financial means to decarbonize at the same pace as European producers, says Kalcher.

Another problem, according to Kalcher, is that the revenue from CBAM goes into the EU budget. Although there is a reference in the legal text that the EU should continue to provide funds for climate adaptation and emissions reduction in the least developed countries (LDCs) – also through CBAM funds – there is no obligation, let alone a defined share for this purpose. Whether the criticism of the BASIC countries was just a tactical maneuver or they actually demand constructive talks will be seen throughout the week, believes Kalcher.

The EU has not explained CBAM well enough

Dutch Social Democrat Mohammed Chahim, CBAM rapporteur for the European Parliament, considers most of the criticism a misunderstanding. Even in Commission circles, there is little openness to criticism, as it involves working with false claims. Between 2026 and 2040, China is expected to export around 869 million tons of CBAM-liable goods to the EU, according to forecasts by S P Global Commodity Insights. According to S P, this would correspond to over 201 million tons of embedded CO2 emissions (CO2 equivalents) credited under CBAM.

Since only direct emissions – those from the production process itself – are covered by CBAM, the instrument's impact on export prices is significantly lower than claimed by BASIC countries. Indirect emissions – those from electricity generation for the production process – are only affected by CBAM in limited cases.

Sven Harmeling, Coordinator for International Climate Policy at the aid organization CARE, considers the BASIC countries' move a "call for attention", not having the impact to significantly influence negotiations. However, he also points out that the EU has not explained how CBAM works well and offered little help to fulfill CBAM criteria.

EU Parliamentarian Chahim can understand why countries are concerned about the impact on their industries. Therefore, he is willing to discuss these concerns with everyone and is ready to adapt the law if necessary, he said in an interview with Table.Media.