BRICS Environment Ministers Challenge EU Carbon Border Measures, Highlighting Climate Finance, Trade Justice and Global South Concerns

Recent Developments:

• On 18 August 2026, the 12th BRICS Environment Ministers’ Meeting was held in New Delhi under India’s 2026 BRICS Chairship, with Union Minister for Environment, Forest and Climate Change Bhupender Yadav leading the meeting. The meeting adopted a Joint Ministerial Statement and outcome documents focused on climate action, sustainability, knowledge sharing and environmental cooperation.
• BRICS Environment Ministers described the European Union’s Carbon Border Adjustment Mechanism (CBAM) as a unilateral, punitive, discriminatory and protectionist trade measure, arguing that carbon-linked border measures can disproportionately affect developing economies.
• The BRICS position reflects a wider Global South concern that climate policies adopted by advanced economies should not become disguised restrictions on international trade or shift the burden of decarbonisation onto developing countries.
• The ministers also called for enhanced climate finance for developing countries, including greater support for adaptation through grants and concessional finance.
• The issue is particularly significant for India because steel and other carbon-intensive industries face increased compliance and competitiveness pressures in the European market after the CBAM entered its definitive phase in 2026.

Carbon Border Adjustment Mechanism:

Meaning and Objective:

• The Carbon Border Adjustment Mechanism (CBAM) is an European Union climate policy instrument designed to place a carbon-related cost on certain carbon-intensive goods imported into the EU.
• Its stated objective is to prevent carbon leakage, under which production may shift from jurisdictions with stringent climate regulations to jurisdictions with relatively weaker carbon constraints.
• CBAM attempts to ensure that imported products bear a carbon cost broadly comparable to that faced by EU producers under the EU Emissions Trading System (EU ETS).
• The EU therefore presents CBAM as a climate measure intended to maintain the competitiveness of cleaner European production and encourage decarbonisation of global supply chains.

Sectors Covered:

• The definitive CBAM regime currently covers six major sectors: cement, iron and steel, aluminium, fertilisers, electricity and hydrogen.
• These sectors were selected because their production involves significant greenhouse-gas emissions and they face comparatively high risks of carbon leakage.
• The mechanism therefore has direct relevance for India's iron and steel, aluminium and fertiliser industries, particularly firms integrated into EU supply chains.

Implementation Timeline:

• The transitional phase operated from 1 October 2023 to 31 December 2025, during which importers primarily had to report embedded emissions without purchasing and surrendering CBAM certificates.
• The definitive regime began on 1 January 2026, making CBAM a substantive carbon-cost mechanism rather than merely a reporting system.
• Under the definitive regime, authorised importers declare embedded emissions and surrender the corresponding CBAM certificates.
• The certificate price is linked to the price of allowances under the EU ETS, thereby connecting the carbon cost of imported products with the EU's domestic carbon-pricing framework.
• Importers can deduct an amount corresponding to a carbon price already paid in the country of production, subject to the applicable CBAM rules.

Why CBAM Matters for India:

Export Competitiveness:

• India is a major exporter of iron and steel products to the European Union, making the sector particularly exposed to CBAM-related compliance costs.
• India's steel production generally has a higher carbon intensity than comparable EU production, partly because of the country's greater dependence on coal-intensive production routes.
• Consequently, Indian exporters with higher embedded emissions can face a larger carbon-related cost when accessing the EU market.

Evidence from Indian Steel Exports:

• A June 2026 study in Nature Climate Change examined firm-level Indian steel exports during the CBAM reporting phase and found that high-emission firms experienced significant declines in EU-bound export quantities and revenues, while relatively low-emission firms maintained their export levels.
• The study found that high-emission firms experienced approximately 5% additional declines in monthly export quantities and 9% declines in monthly revenues relative to lower-emission firms during the reporting period.
• The findings indicate that CBAM may not simply reduce India's aggregate exports but may reallocate EU-bound trade from more carbon-intensive producers towards relatively cleaner producers.
• This creates both a challenge and an opportunity for India: inefficient producers may lose competitiveness, while firms investing in green steel, renewable electricity and low-carbon production technologies may gain market access advantages.

BRICS Position on CBAM:

Trade and Climate Justice:

• BRICS countries have objected to CBAM because they view unilateral carbon-linked trade measures as potentially creating new barriers to international trade.
• Developing economies argue that climate responsibility should not be transformed into unilateral trade restrictions imposed by advanced economies.
• The dispute reflects a broader tension between environmental protection and the principle of non-discriminatory international trade.
• BRICS' position is therefore connected with the principle of Common but Differentiated Responsibilities and Respective Capabilities (CBDR-RC) under the international climate regime.

WTO Concerns:

• CBAM raises questions regarding compatibility between climate policy and World Trade Organization principles, particularly non-discrimination and the treatment of imported and domestic products.
• The EU argues that CBAM is designed to establish equivalent carbon costs rather than discriminate against foreign producers.
• Developing countries, however, can contend that differences in historical emissions, development levels, production technologies and access to climate finance make a uniform carbon-related border measure potentially inequitable.
• The issue demonstrates the increasing overlap between trade policy and climate policy, sometimes described as the emergence of green protectionism.

Climate Finance and BRICS:

Adaptation Finance:

• BRICS has emphasised that developing countries require greater climate finance to implement mitigation and adaptation measures.
• Adaptation finance supports measures that enable societies and infrastructure to withstand climate impacts, including climate-resilient infrastructure, disaster preparedness, water security and agricultural resilience.
• BRICS has called for greater financial support for developing countries, including grants and concessional finance, which impose easier repayment conditions than conventional market-based loans.

Why Grants and Concessional Finance Matter:

• Developing countries often face high debt burdens, limited fiscal space and high borrowing costs, which restrict their ability to finance climate adaptation.
• Excessive dependence on loans can increase indebtedness while climate-related disasters simultaneously reduce fiscal capacity.
• Grant-based and highly concessional climate finance can therefore reduce the risk of creating additional debt burdens for vulnerable developing economies.
• This position is consistent with the broader developing-country demand for accessible, predictable, adequate and affordable climate finance.

CBAM and the Principle of Equity:

Historical Responsibility:

• Developed countries have historically contributed a disproportionately large share of accumulated greenhouse-gas emissions, while developing countries continue to face significant development and poverty-reduction requirements.
• Developing countries therefore argue that climate policy should recognise historical responsibility and differentiated capabilities.
• India has consistently emphasised that climate action must preserve the developmental space of developing countries.

Technology and Green Transition:

• CBAM can nevertheless create incentives for Indian industries to accelerate industrial decarbonisation.
• Cleaner production technologies can reduce both domestic emissions and the carbon cost associated with exports to the EU.
• The transition requires access to green technologies, affordable finance, renewable energy, carbon accounting systems and skilled manpower.
• Thus, the appropriate Indian response should combine diplomatic engagement with accelerated domestic industrial transformation.

India’s Response and Policy Options:

Domestic Decarbonisation:

• India should accelerate the transition towards low-carbon industrial production, particularly in steel, aluminium, cement and fertiliser manufacturing.
• Expansion of renewable electricity, energy efficiency, green hydrogen and low-carbon production technologies can reduce the emissions intensity of Indian exports.
• The National Green Hydrogen Mission can contribute to decarbonising hard-to-abate sectors, particularly where hydrogen can substitute for fossil-fuel-intensive industrial processes.

Carbon Accounting:

• Indian exporters require reliable systems for measuring, reporting and verifying embedded carbon emissions.
• Strengthening domestic Measurement, Reporting and Verification (MRV) systems can improve the credibility of Indian emissions data before international regulators.
• Accurate emissions accounting can also prevent Indian firms from being disadvantaged by the use of conservative default emissions values.

Diplomatic Engagement:

• India should continue engaging with the EU to seek transparent methodologies, recognition of domestic carbon-reduction efforts and avoidance of double carbon pricing.
• BRICS can provide a platform for coordinating developing-country positions on carbon border measures, climate finance and technology transfer.
• India should simultaneously engage through the WTO and UN climate framework to ensure that climate-related trade measures remain consistent with multilateral principles.

Broader Significance for Global Climate Governance:

From Climate Cooperation to Climate-Linked Trade:

• CBAM demonstrates that climate policy is increasingly influencing international trade, industrial competitiveness and global supply chains.
• Countries can no longer treat climate negotiations and trade negotiations as completely separate policy domains.
• Carbon intensity is gradually becoming a factor in determining market access and export competitiveness.

Green Protectionism versus Genuine Decarbonisation:

• A major policy challenge is distinguishing between legitimate environmental regulation and green protectionism.
• Climate measures should ideally reduce global emissions rather than merely shift production and trade patterns.
• Effective global climate governance therefore requires transparency, equity, technology transfer, adequate finance and multilateral consultation.

BRICS as a Global South Platform:

• BRICS provides an important platform for developing and emerging economies to coordinate positions on climate finance, sustainable development and global economic governance.
• The grouping currently comprises 11 members: Brazil, Russia, India, China, South Africa, Saudi Arabia, Egypt, United Arab Emirates, Ethiopia, Iran and Indonesia.
• Indonesia became a full BRICS member in 2025, completing the latest major expansion of the grouping.
• The expanded membership strengthens BRICS' representation across Asia, Africa, the Middle East and Latin America, thereby increasing its potential role in articulating Global South positions.

Way Forward:

For India:

• India should pursue a dual strategy of negotiation and decarbonisation, challenging discriminatory trade barriers while simultaneously improving the carbon efficiency of domestic industries.
• The government should support vulnerable exporters through green finance, technological modernisation, renewable-energy access and carbon-accounting capacity.
• Indian industries should treat CBAM not merely as a trade barrier but also as a signal of the emerging global shift towards carbon-conscious production and trade.

For BRICS:

• BRICS should develop common technical positions on carbon accounting, carbon border measures and climate finance while avoiding fragmentation of the global climate regime.
• The grouping can promote cooperation in green technologies, renewable energy, climate-resilient infrastructure and sustainable industrialisation.
• BRICS should advocate greater availability of grant-based and concessional climate finance for developing countries while strengthening cooperation with multilateral institutions.

For the Global Climate Regime:

• Climate-linked trade measures should remain consistent with multilateralism, transparency, equity and international trade rules.
• Developed countries should complement climate-related trade policies with greater finance, technology transfer and capacity building for developing countries.
• Climate policy should ultimately encourage global emissions reduction, rather than transferring production, emissions and economic burdens from one jurisdiction to another.

Value Addition for UPSC:

Key Concepts:

• Carbon Leakage: The relocation of carbon-intensive production to jurisdictions with weaker climate regulations, potentially increasing global emissions.
• Carbon Pricing: Assigning an economic cost to greenhouse-gas emissions to encourage producers and consumers to reduce emissions.
• CBAM: A border mechanism through which the EU imposes a carbon-related cost on selected carbon-intensive imports.
• Climate Adaptation: Measures that reduce vulnerability and improve resilience to actual or expected climate impacts.
• Concessional Finance: Financing provided on terms more favourable than ordinary market-based lending, such as lower interest rates or longer repayment periods.
• Green Protectionism: The use of environmental objectives or standards in ways that may function as discriminatory barriers against foreign producers.

Important Facts:

• CBAM definitive regime: Began on 1 January 2026.
• CBAM sectors: Cement, iron and steel, aluminium, fertilisers, electricity and hydrogen.
• Transitional phase: October 2023–December 2025.
• 12th BRICS Environment Ministers’ Meeting: New Delhi, 18 August 2026.
• Nature Climate Change finding: High-emission Indian steel exporters experienced significantly greater declines in EU-bound quantities and revenues than lower-emission firms during the CBAM reporting phase.

BRICS membership: 11 countries, representing a major grouping