As the climate crisis escalates, the European Union and the United Kingdom are moving forward with their Carbon Border Adjustment Mechanism, promoting it as a landmark tool linking trade and climate policy. But the CBAM’s ambitious aims are now meeting a growing backlash.
The CBAM puts a price on the carbon content of emissions-intensive imports like steel, aluminum, and cement. The goal is to reinforce the EU’s Emissions Trading System (ETS) and create a level playing field between domestic and foreign producers, thereby incentivizing greener production practices worldwide.
Despite the European Parliament’s support for recent proposals to simplify the CBAM, its current design and pace of implementation risk undermining its legitimacy. Rather than advancing a fair and equitable energy transition, it could stoke trade tensions and fuel economic fragmentation, exacerbate inequality, and deliver only limited climate benefits.
The transition phase, which began in October 2023, requires importers to report carbon dioxide emissions associated with their goods, but does not require them to pay. That will change in January 2027, when the CBAM’s levies on carbon-intensive imports take effect.
Most countries in the Global South – particularly major exporters to the EU – are unprepared for this shift, because they lack the technical capacity to track and report embedded CO2 emissions, the institutional infrastructure to verify them, and the fiscal space to absorb the costs of compliance. These are some of the symptoms of a deeply unequal global system in which the burdens of climate action have not been fairly distributed.
However commendable the CBAM’s stated goals may be, its inherent asymmetries must not be overlooked. Applying a uniform carbon-pricing regime to countries with vastly different capacities undermines the principle of a just energy transition and erodes the legitimacy of global climate action by placing a disproportionate burden on those least responsible for the crisis. Many developing economies are still recovering from the COVID-19 pandemic and struggling with rising public debt, in addition to being acutely vulnerable to climate shocks. Now, they are expected to comply with EU and UK standards despite lacking access to robust emissions data systems, clean technologies, regulatory infrastructure, and adequate climate finance.
Compounding the problem, revenues generated through the CBAM will be directed to the budgets of the EU and the UK rather than to international climate finance or support for affected countries. This design flaw reinforces the perception that the CBAM is not a genuine effort to advance global climate goals but an instrument of trade protectionism. Many countries, particularly outside Europe, have voiced such concerns, viewing the mechanism as a unilateral trade measure cloaked in green rhetoric.
The geopolitical consequences could be dire. The CBAM has emerged at a time of fraying multilateralism and escalating trade tensions. Without broader participation and tangible support for affected exporters, it risks fueling economic fragmentation and undermining global trust – just when international climate cooperation is most critical and official development assistance is being slashed.
But the CBAM is not beyond repair. With thoughtful reforms, it can evolve from a rigid policy tool into a catalyst for an equitable climate transition. To achieve this, the EU and the UK should consider postponing the start of financial enforcement until at least 2028, thereby giving developing countries time to prepare and adapt.
This pause must be anchored in a strategic partnership framework that directs resources toward establishing emission-tracking systems, strengthening regulatory capacity, developing carbon-credit markets, and accelerating green industrial investment in climate-vulnerable economies.
Moreover, a portion of CBAM revenues should be allocated to international climate partnerships. This would make the mechanism more equitable, build trust with developing countries, and ensure that carbon pricing serves as an incentive rather than a penalty. Most importantly, the CBAM must not be framed as a final destination, but as a step toward a more coordinated and inclusive carbon-pricing framework. Mutual recognition of national systems, policy flexibility, and transitional thresholds could help prevent fragmentation and promote international alignment.
While the EU and the UK have both the capacity and the influence to help shape global standards, climate leadership demands more than bold policy ambitions; it requires solidarity, partnership, and the recognition of shared but differentiated responsibilities. Rather than simply decarbonizing imports through a transactional approach, policymakers must focus on facilitating low-carbon development.
That goal cannot be achieved through border measures alone. If rushed, the CBAM could become just another divisive international levy. But if recalibrated through a constructive and pragmatic process grounded in trust-building, it has the potential to serve as a unifying platform for international climate cooperation.
The fight against climate change will not be won through exclusion. A sustainable future depends on building systems that bring others along. A well-designed CBAM could play a vital role in that effort.
Rola Dashti is under-secretary-general and executive secretary of the UN Economic and Social Commission for Western Asia.
Claver Gatete is under-secretary-general and executive secretary of the UN Economic Commission for Africa.
Mahmoud Mohieldin, UN special envoy on Financing the 2030 Sustainable Development Agenda and co-chair of the Expert Group on Debt, is a former Minister of Investment of Egypt, former senior vice president of the World Bank Group, and former executive director of the International Monetary Fund.
Copyright: Project Syndicate, 2025.
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