Carbon Border Adjustment Mechanism

In one line: The EU's Carbon Border Adjustment Mechanism (CBAM) charges importers for the carbon emitted in making certain goods, so that EU producers who pay a carbon price are not undercut.

How it works

Importers of covered goods (cement, iron and steel, aluminium, fertilisers, electricity and hydrogen) must report embedded emissions and, from 1 January 2026, pay for them through CBAM certificates priced on the EU carbon market. A transition phase with reporting only ran from October 2023. Credit is given for a carbon price already paid in the country of origin.

Why developing countries object

They argue it is a trade barrier dressed as climate policy and ignores common but differentiated responsibilities under the climate treaties. Indian steel and aluminium exports to the EU are directly exposed. Para 108 of the New Delhi Declaration opposes "unilateral, punitive, discriminatory and protectionist measures" such as carbon border adjustment mechanisms.

Where to go next

• WTO dispute settlement
• New Development Bank