When the European Union’s Carbon Border Adjustment Mechanism (CBAM) took effect on January 1, 2026, it was not an abstraction. For the thousands of workers employed at Indian steel plants that export to European markets, it translated into a direct competitive disadvantage. For MSME exporters of aluminium products in Gujarat, it meant an additional compliance burden they had neither the technical capacity nor the financial reserves to absorb easily. A 2024 study by the Centre for Science and Environment (CSE) found that goods subject to CBAM accounted for nearly 10 per cent of India’s total exports to the EU in 2022-23. India estimates the levy could add an average tax burden of around 25 per cent on affected exports. These are not rounding errors. They are jobs, incomes, and industrial futures.
Brussels presented CBAM as a necessary tool to prevent “carbon leakage” and to level the playing field between European manufacturers and importers from countries with weaker climate regulations. The logic is internally coherent. The politics are globally damaging. For India, Bangladesh, Turkey, and dozens of economies whose steel, aluminium, cement, and fertilisers now face carbon pricing at the EU border, CBAM is not primarily a climate instrument. It is a competitiveness instrument wearing the language of sustainability.
The United States compounds the problem from a different direction. The Inflation Reduction Act (IRA), passed in August 2022, directs approximately $369 billion in subsidies to domestic clean industries over a decade, with buy-American conditionalities that effectively exclude manufacturers without a US free-trade-agreement partnership. India has no such FTA. Indian solar component manufacturers and battery material producers, many of them operating under the Production-Linked Incentive scheme that the government designed specifically to build export-oriented clean-energy supply chains, face direct competitive exclusion from the world's largest clean-energy subsidy regime.
As Down To Earth (DTE) and CSE documented in 2023, UNCTAD has explicitly noted that policies like the IRA and CBAM together point to “a missing developmental dimension in trade commitments,” combined with evidence that industrialised economies are using industrial policy tools to bolster dominance in emerging green industries. Washington and Brussels both call these measures climate policy. From most of the Global South, they look like industrial policy dressed in green.
The EU has argued, with some legal seriousness, that CBAM is non-discriminatory in principle because it applies the same carbon price to imports that domestic producers face under the EU Emissions Trading System. But this is an argument about formal equality, not substantive capacity. Equating the decarbonisation burden of a German steelmaker with that of an Indian one ignores the gulf in available capital, technology, and historical responsibility.
The deeper problem is structural. International climate governance, anchored in the UNFCCC and the Paris Agreement, operates on the principle of Common But Differentiated Responsibilities and Respective Capabilities (CBDR-RC). Trade governance, anchored in the WTO, operates on non-discrimination and most-favoured-nation principles. The EU claims GATT Article XX as legal cover for CBAM. But as a 2023 UNCTAD analysis on border carbon measures documented, Article XX was designed as a domestic policy exception, not a framework for asymmetrically imposing carbon costs on economies that contributed least to atmospheric concentrations and lack comparable fiscal capacity to decarbonise rapidly.
India has formally raised concerns about CBAM's WTO compatibility at the organisation’s Committee on Trade and Environment 29 times between 2020 and 2024, second only to China and Russia. At COP30 in Belem, India told negotiators directly: “Unilateral, trade-restrictive climate measures are not about ambition. They are about giving competitive advantage to industries in the Global North at the cost of development in the Global South.” That is a clear and accurate diagnosis. The problem is that diagnosis alone does not build institutions.
Before India can credibly lead a multilateral response, it needs to acknowledge a tension within its own industrial trajectory. DTE reported in May 2026 that India is driving global coal-based steel expansion, with Japanese steelmaker JFE Steel planning a $2 billion coal-based joint venture with JSW Steel. India simultaneously opposes CBAM on equity grounds and continues to attract foreign investment in the very carbon-intensive production processes that CBAM targets. That contradiction will not disappear from Geneva or Bonn just because India declines to name it. Addressing it domestically, including through the Carbon Credit Trading Scheme that India is developing, is also the clearest legal pathway to eventual CBAM exemption. A credible domestic carbon price would allow Indian exporters to claim credit against CBAM charges. That is not a concession to the EU’s framework. It is a strategic move within it.
India’s climate credentials provide real negotiating standing. With 500 GW of renewable energy targeted by 2030, a 45 per cent reduction in emissions intensity over 2005 levels, and a net-zero commitment by 2070, India approaches this effort with domestic credibility that no Global North government can dismiss. The architecture it should be building rests on three pillars.
The first is a joint WTO-UNFCCC interface mechanism that requires any border carbon measure to demonstrate consistency with CBDR-RC, provide mandatory transition periods calibrated to a country’s development stage, and submit contested measures to a dispute panel with developing-country representation. The WTO-WIPO cooperation agreement already proves that cross-institutional legal architecture between multilateral bodies is negotiable.
The second is a clean technology intellectual property flexibility framework, drawing on the logic of the TRIPS Agreement’s Article 31bis public health waiver, which enabled generic access to life-saving medicines in the developing world, and applying similar flexibility to solar, wind, battery, and hydrogen technologies. This is a long-term goal requiring coalition-building first through the UNFCCC Article 10 technology framework.
The third is a verified climate finance definition that distinguishes concessional grants and genuine technology transfers from development aid relabelled as climate support, anchored at the UNFCCC Standing Committee on Finance.
| Pillar | Institutional Home | Near-Term Action |
| WTO-UNFCCC interface on border carbon measures | WTO Committee on Trade and Environment + UNFCCC SBs | Formal concept notes at COP31 preparatory sessions, Bonn 2026 |
| Clean tech IP flexibility framework | UNFCCC Art. 10 Technology Mechanism + TRIPS Council | Coalition building in BASIC and LMDC blocs |
| Verified climate finance definition | UNFCCC Standing Committee on Finance | Submission aligned with OECD DAC criteria reform debate |
Brazil, South Africa, and the LMDC group are India’s most credible partners. BRICS entered COP30 with its first joint climate finance recommendation, calling for concessional flows, accessible financing, and systemic multilateral development bank reform. That coordinated positioning is a foundation to build on. China’s commercial interest in opposing CBAM is real, but India should build the compact’s architecture within BASIC and the WTO developing-country caucus first, where Chinese obstruction carries reputational costs.
WTO MC14, which concluded on March 30, 2026, in Yaounde, Cameroon, closed without a final agreed package on the issues where this compact most needed traction. The conversation continues. The next concrete windows are the UNFCCC subsidiary body sessions in Bonn in 2026 and the COP31 preparatory process. The architecture of the clean-energy trade order is being written now, in Geneva dispute panels and Brussels regulatory consultations. Countries that engage these processes with institutional proposals will shape who the rules favour. Countries that respond only with procedural objections will find themselves disadvantaged regardless of how ambitious their domestic programmes become. India has the standing, the coalitions, and the roadmap. The question is whether it tables the proposal before others write the rules around it.
Ankit Mishra is an ICSSR Doctoral Fellow and Research Scholar at G.B. Pant Social Science Institute, Prayagraj, where his work focuses on environmental politics & governance, environmental justice, climate change, and public policy.
Views expressed are the author’s own and don’t necessarily reflect those of Down To Earth