Why developing countries oppose the EU's carbon border tax

• EU approved first carbon border tax in 2023
• Carbon tax on imports begin January 2026
• Developing countries warn of unfair costs

NEW DELHI - Europe's carbon border tax has come into force as of January 2026, marking a major shift in how the European Union links climate policy with global trade.

Under the Carbon Border Adjustment Mechanism (CBAM), the EU places a carbon tax on imports of certain high-emission goods, including steel, aluminium, cement, fertilisers and electricity.

The EU says the policy will help cut emissions and prevent companies from shifting production to countries with weaker climate rules.

But some poorer nations argue it risks pushing the cost of decarbonisation onto poorer exporters, raising concerns over fairness, trade rules and access to finance and clean technology.

Here's a look at the CBAM's potential to reduce emissions - and what it might mean for the EU's trading partners.

What is the main goal of the EU carbon border tax?

The European Union has an Emissions Trading System (EU-ETS) based on a "cap-and-trade" approach, whereby it sets a cap on the emissions an industry can emit, and companies trade emissions allowance certificates to stay within those limits.

The system sets a price on carbon emissions in polluting industries, making investing in efficient production and clean power sources more attractive. The ETS helped the EU cut its industrial emissions by about 35% between 2005 and 2021.

The EU is further tightening the system as part of its "Fit for 55" package, a series of laws designed to achieve its key climate goal of reducing emissions by at least 55% from 1990 levels by 2030, including through the CBAM.

The CBAM aims to prevent emissions "leakage" from the EU-ETS, which could happen if production physically shifts to countries with lower - or no - carbon prices, or if EU importers source goods that are cheaper because they do not have to factor in the cost of their carbon emissions, experts said.

How much global emissions can CBAM cut?

Evidence to date suggests the CBAM and similar systems undertaken by other countries may have only limited effect in curbing emissions at the global level.

In 2015, carbon emissions from international trade accounted for about 27% of global emissions, meaning goods and services consumed in the countries where they are produced are responsible for a far higher share, according to a 2021 report by the United Nations Conference on Trade and Development (UNCTAD).

Another 2021 UNCTAD report estimated that at a carbon price of $44 per tonne, a CBAM tax on imports would reduce global emissions by only 0.1%, while the EU's emissions would decline by 0.9%.

The EU's own assessment projects that the CBAM would result in a 13.8% reduction in the bloc's emissions by 2030, compared with 1990 levels, and a cut of about 0.3% for the rest of the world.

How would CBAM affect other countries?

The CBAM would have a financial impact on the EU's trading partners in the sectors covered by the tax, especially least-developed countries.

UNCTAD estimates suggest that developing-country incomes would decline by a combined $5.86 billion at an EU carbon price of $44 per tonne.

Impacts for developing countries could expand dramatically once the CBAM is extended to more sectors or if other developed nations introduce similar measures, analysts said.

Countries could gain a competitive advantage from the EU tax, however, if their production is cleaner than that within the EU.

Why are countries complaining about CBAM?

Many developing countries regard the CBAM as a protectionist policy that renders free trade agreements meaningless, said Ajay Srivastava, an India-based trade expert and founder of the Global Trade Research Initiative.

At the U.N. COP30 climate summit in November 2025, countries officially discussed trade-linked measures like CBAM for the first time, reflecting mounting objections from developing nations about the policy's fairness and impacts.

Countries including China, Russia, Indonesia and South Africa have brought formal objections to discuss CBAM at the World Trade Organization, where countries including India and Brazil have also raised complaints.

The EU has stated that the CBAM is compatible with WTO rules, aiming to treat imports and domestic producers equally under international trade obligations, and that it will offer funding to countries affected by the carbon border tax to ease concerns among developing economies.

This article was updated on January 9, 2026 when CBAM came into force.

(Reporting by Bhasker Tripathi; Editing by Jack Graham and Ellen Wulfhorst.)