Answer

The European Union’s Carbon Border Adjustment Mechanism (EU-CBAM), a carbon pricing tool, seeks to prevent carbon leakage by imposing levies on imports from countries with less stringent climate policies. This policy is pivotal for the EU’s Green Deal goals, but its alignment with the principle of Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC) under UNFCCC frameworks has sparked global debate over fairness and equity in climate responsibility.

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Alignment of EU-CBAM with CBDR-RC

• Encourages Global Climate Accountability: EU-CBAM promotes shared responsibility by holding exporting countries accountable for emissions, aligning with the “common responsibilities” aspect of CBDR-RC.
• Supports Universal Climate Goals: By addressing carbon leakage, EU-CBAM reinforces global efforts like the Paris Agreement, advocating collective climate action.
  For example: The EU estimates that CBAM could reduce global carbon emissions by 25% in targeted sectors by 2030.
• Incentivizes Low-Carbon Technologies: CBAM encourages exporting nations to adopt advanced technologies for reducing emissions.
  For example: South Africa’s steel industry has begun transitioning to hydrogen-based methods to align with EU standards.
• Addresses Capabilities Through Selective Application: CBAM targets specific carbon-intensive industries, considering the economic capabilities of exporting nations.
• Promotes Global Climate Finance Discourse: CBAM revenues could potentially be allocated to international climate finance, supporting adaptation in developing countries.

Contradiction of EU-CBAM with the Principle of CBDR-RC

• Imposing Uniform Standards on Diverse Economies: EU-CBAM enforces uniform carbon pricing, ignoring economic disparities between developed and developing nations, which contradicts CBDR-RC.
  For instance: India has expressed concerns about the mechanism undermining its development goals while addressing the EU’s environmental objectives.
• Shifting Financial Burden to Developing Nations: EU-CBAM transfers emission reduction costs to exporters, violating CBDR-RC, which mandates developed nations to lead climate efforts.
  For example: Under the UNFCCC’s production-based accounting, exporting nations are accountable for emissions from goods produced for export, even if not consumed domestically. This unfairly burdens developing economies with accusations of climate responsibility for higher exports.
• Neglecting Historical Emissions: EU-CBAM penalises current emitters without accounting for developed nations’ historical contributions to global emissions, breaching CBDR-RC.
  For example : EU-CBAM does not take into consideration the issue of quantifying emission reduction responsibilities unlike an Equity-based Accounting (EBA) of Nationally Determined Contributions.
• Lack of Adequate Transition Time for Developing Nations: CBAM provides developing economies insufficient time to adapt to such stringent requirements, exacerbating inequities.
  For example: The EU had decades to achieve emission reductions, starting with a 20% target below 1990 levels by 2020, progressing to 55% under the 2019 European Green Deal.
• Lack of Capacity-Building Support: EU-CBAM fails to offer technology or financial aid to help developing countries transition, a key principle of CBDR-RC.
  For example: The EU has decided to keep the revenues generated from the CBAM as its resources, which will be used to fund the NextGenerationEU recovery tool and operate the CBAM. 
• Potential for Trade Protectionism: EU-CBAM risks acting as a trade barrier, disproportionately affecting developing economies, undermining CBDR-RC’s equity principle.
  For example: The EU comprises 20.33% of India’s total merchandise exports, of which 25.7% are affected by CBAM.

Way Forward

• Integrating Climate Finance: CBAM revenues should be allocated to support green transitions in developing nations, aligning with equity principles.
  For instance: A fund similar to the Green Climate Fund can ensure fair distribution of CBAM proceeds for adaptation and mitigation projects.
• Enhancing Technology Transfer: EU must facilitate technology sharing to help developing countries meet greener standards without imposing prohibitive costs.
  For instance: Partnerships like the EU-India Clean Energy and Climate Partnership can be expanded to promote low-carbon technology.
• Gradual Phased Implementation: CBAM can be introduced with a transition period and capacity-building measures to ease the burden on exporters.
  For instance: A five-year phase-in period could allow exporters to align their practices with CBAM requirements.
• Collaborative Global Frameworks: Establishing cooperative dialogues with affected nations can address concerns and enhance CBAM’s acceptance.
  For instance: EU and ASEAN can collaborate to minimise the impact on Southeast Asian exporters heavily reliant on carbon-intensive sectors.
• Aligning CBAM with WTO and UNFCCC Norms: Ensuring that CBAM complies with global trade and climate agreements can mitigate criticism of unfair trade practices.
  For instance: CBAM rules can incorporate the WTO’s non-discrimination principles while adhering to the CBDR-RC framework.

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EU-CBAM marks a significant step in addressing global carbon leakage but raises equity concerns under the CBDR-RC principle. Adopting global best practices, such as climate finance models from the Green Climate Fund, and cultivating inclusive cooperation with developing nations, can align CBAM with UNFCCC principles and global climate equity goals.

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