EU's CBAM : Trade , Climate , and Global Equity Concerns.

  Oct 06, 2023

Carbon Border Adjustment Mechanism (CBAM)

What is the Carbon Border Adjustment Mechanism (CBAM)?

The Carbon Border Adjustment Mechanism (CBAM) is an initiative by the European Union aimed at placing a price on carbon. It is designed to level the playing field by promoting cleaner industrial processes.
Its primary purpose is to motivate cleaner production, but it also entails detailed documentation requirements for exporters.

Why is there concern about the CBAM’s impact on developing nations?

The CBAM carries undertones of neo-colonialism.While designed to promote environmental responsibility, it places a higher burden on developing nations by imposing increased documentation and potentially higher costs.
This raises ethical concerns about equity, historical accountability, and the paternalistic stance of developed nations.

How does CBAM align with historical emissions and responsibilities?

Many industrialised nations historically thrived on carbon-intensive growth. While these nations reached prosperity through carbon-intensive means,
they now seek to impose environmental responsibilities on developing nations that are still in their growth phase.

What is the timeline for the CBAM’s implementation?

Starting October 1, 2023, the CBAM transition phase begins and will run until December 31, 2025.
During this period, exporters to Europe must provide detailed production and emission data. Taxation starts from January 1, 2026, and by 2034, all items will come under CBAM’s ambit.

How does the CBAM potentially clash with WTO rules?

The CBAM might contravene WTO rules, notably the principle of non-discrimination.The mechanism may differentiate imports based on carbon content,
placing developing nations at a disadvantage. It also raises questions about product classifications and treatment under WTO regulations.

How does the CBAM relate to the Paris Agreement?

The alignment of CBAM with the Paris Agreement is in question, as the mechanism could deviate from the principle of Common but Differentiated Capacities and Responsibilities.
It may unfairly burden nations least responsible for historical emissions without providing them with appropriate exemptions or support.

Are there economic concerns regarding the CBAM?

Yes, many businesses and trade associations worry about the unpredictable costs associated with the extensive paperwork required by CBAM.
Furthermore, studies suggest that the CBAM may not be as effective in preventing carbon leakage as intended and may increase economic burdens on exporting countries.

How has the CBAM been perceived as a potential “Trojan horse”?

While the CBAM is presented as an environmental solution, it may have unintended consequences, such as erecting trade barriers for developing nations without fully addressing its environmental objectives.
This duality has drawn comparisons to the Trojan horse, appearing beneficial but possibly harboring hidden challenges.


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