BASIC Nations Seeks CBAM Discussion at COP 29

China, representing the BASIC countries (Brazil, India, South Africa, and China), has submitted a request to the UNFCCC for discussions on “restrictive trade measures” such as Carbon Border Adjustment Mechanism (CBAM).

India and China’s Position at COP29

• Both nations, part of the BASIC group, submitted a formal request at COP29 to discuss climate-linked trade restrictions.
• They argue for a balanced approach that avoids economic discrimination while still addressing global climate goals.
• While the proposal was sidelined, the issue remains contentious and is expected to resurface in future discussions.

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About Carbon Border Adjustment Mechanism (CBAM)

Issues Regarding CBAM for Developing Nations

• Export Competitiveness: Developing countries, including India and China, argue that CBAM disproportionately harms their exports.
• Differentiated Responsibilities: CBAM overlooks the principle of “common but differentiated responsibilities” embedded in the Paris Agreement, which recognizes the differing capacities of nations to combat climate change.
• Economic Disadvantage: Developed nations have historically been major polluters and have transitioned to greener technologies over decades.
  • Equipped with cleaner technologies, developed Countries will benefit from CBAM as their goods are less likely to be taxed, further marginalizing developing nations.
• Violation of Agreements: Developing nations argue that trade restrictions like CBAM violate international agreements such as the Paris Accord, which seeks to safeguard developing nations from the socio-economic impacts of climate response measures.
• Unilateral Actions: India, China, and others claim that unilateral measures like CBAM bypass the collaborative framework of global climate negotiations.
  • They fear such measures could set a precedent for protectionism disguised as climate action.

Wider Implications of Climate-Related Trade Measures 

• Accelerating Protectionism: CBAM and similar measures could lead to broader trade restrictions, disrupting global supply chains.
  • Countries might adopt “nearshoring” or “reshoring” strategies, prioritising local production over global trade.
• Innovation and Environmental Standards: On the positive side, such measures might spur innovation in green technologies and enforce higher environmental standards globally.
• Disruptions in Global Trade: Increasing climate-induced natural disasters already pose risks to global supply chains.
  • Trade measures linked to climate goals add to these disruptions, making international trade more uncertain.
• Potential Spillover: Other nations, including Canada and the UK, are considering their versions of CBAM, which could extend its impact on global trade.

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