EU’s Carbon Border Tax Mechanism Unfair to Developing Countries: CSE

A new report by the Delhi-based think tank Centre for Science and Environment (CSE) criticizes the European Union’s Carbon Border Adjustment Mechanism (CBAM) as an unfair burden on developing countries. The CSE report highlights how policies like CBAM shift the responsibility of decarbonizing heavy industrial sectors onto the Global South, creating obstacles to development.

Key Highlights of the Report

• Report Title: "Carbon Border Adjustment Mechanism: An Unfair Burden"
• Introduction of CBAM: The CBAM, announced in 2022, taxes imports like iron, steel, cement, aluminum, and fertilizers based on the carbon emissions used in their production. This aims to level the playing field for European companies facing stricter environmental regulations.
• Criticism by CSE: Developing countries, with less developed economies and reliance on heavy industries, will be disproportionately impacted by CBAM.
• Climate Justice: Sunita Narain, Director General of CSE, emphasizes the need for climate justice in trade policies, pointing out that developed nations are placing the financial burden of transitioning to cleaner technologies on developing countries.

Reason Behind the Situation

• Historical Emissions: Developed nations have historically emitted more greenhouse gases, yet are now imposing financial burdens on developing countries for decarbonization.
• Economic Challenges: Developing nations, already struggling with economic growth and development, face additional challenges due to the CBAM.
• Lack of Support: There is insufficient financial and technical support from developed countries to help developing nations transition to low-carbon technologies.

Impact of CBAM on Developing Countries

• Economic Burden: Developing countries may face increased production costs and reduced competitiveness in global markets due to CBAM.
• Obstacles to Development: The financial and technical challenges imposed by CBAM may hinder the economic development and industrial growth of developing nations.
• Violation of Principles: The CBAM is seen as a violation of the principle of common but differentiated responsibilities (CBDR) enshrined in international climate agreements.

Required Measures

• Revenue Allocation: The EU should allocate revenue from CBAM to support developing countries in shifting to low-carbon manufacturing.
• Increased Climate Finance: There is a need for increased climate finance for developing nations to facilitate their transition to cleaner technologies.
• Exemptions for Vulnerable Countries: The most vulnerable countries should be exempted from the CBAM tax to prevent further economic hardship.
• Sectoral Mitigation Plans: Developing countries should implement sectoral mitigation plans that outline emissions reduction targets.
• Domestic Carbon Tax: Consideration of a domestic carbon tax on exports to create a decarbonization fund.
• Greener Production Methods: Diversifying production processes for different markets, prioritizing greener methods for regions with CBAMs.

Mains Practice Question

Q: “The EU's Carbon Border Adjustment Mechanism (CBAM) poses significant challenges to developing countries. Discuss the fairness of such mechanisms and suggest measures to ensure a just transition for developing economies.”