Unilateral trade measures will delay climate transition — COP29 must address this

The 29th Conference of Parties (COP29) to the United Nations Framework Convention on Climate Change (UNFCCC) is scheduled to be held in Baku, Azerbaijan, next week. A proposal by the BASIC group of countries (Brazil, China, India, and South Africa) has requested the COP29 Presidency and the UN Climate Change Secretariat to add the following item to the climate conference agenda: “Concerns with climate-change related unilateral restrictive trade measures, and identifying the ways to promote international cooperation in line with the First GST Outcome”.

This proposal addresses measures such as carbon border taxes such as the European Union’s Carbon Border Adjustment Mechanism (EU CBAM), set to come into effect in 2026, along with the deforestation regulation (EU DR), which has now been postponed.

As researchers and civil society representatives from the Global South, we support this proposal. The concerns of developing countries regarding these policies must be heard and addressed to foster true cooperation towards the Paris Agreement’s goals and its pursuit of the UNFCCC.

Shifting the burden to Global South

Our collective research indicated that climate-labelled trade measures disproportionately burden developing countries. The CBAM, the most prominent example of these tools, effectively shifts the costs of decarbonisation onto developing economies. 

Taking India as an example, we found that the indicative tax burden on imposing a 100 Euros per tonne carbon price (around $108 or Rs 9,152 per tonne), would be 25 per cent on average per year. This is over and above the value of CBAM-covered goods exported to the EU — comparable to 0.05 per cent of India’s gross domestic product (GDP) in 2022-23.

In Africa, a partial coverage scenario combined with the EU’s phasing out of free allowances in the Emissions Trading System may cause a 0.33 per cent GDP decline, amounting to $25 billion per year, we found in a separate analysis.

And this is when climate finance geared towards helping developing countries decarbonise has been woefully inadequate.

Tools like the CBAM appear to further the cause of climate protection but exhibit the telltale signs of trade protectionism and economic nationalism. Many of these policies have been driven by developed nations in response to the perceived threats of deindustrialisation and carbon leakage.

Developing countries must decarbonise to mitigate the worst impacts of climate change and avoid being locked out of a global economy shifting towards greener goods and technologies — but they require the resources to do so — financing, technology and more.

Greenhouse gas emissions cannot be delinked from issues of historical responsibility and climate justice and the principle of common but differentiated responsibilities (CBDR) and the UNFCCC acknowledges this. However, the current multilateral trade system fails to recognise CBDR and if climate concerns are to inform trade practices, this must change.

For the past year, developing countries have been highlighting these issues at various forums. At COP28 in Dubai, United Arab Emirates, countries such as the African Group, China, Iran, Brazil, Egypt and the BASIC group underlined the harm these unilateral measures inflict on their economies, hindering poverty eradication and progress towards the Paris Agreement.

The October 2024 BRICS declaration condemned “unilateral measures introduced under the pretext of climate and environmental concerns” and reaffirmed BRICS countries’ commitment to coordinate on these matters.

COP must provide space for this discussion

Unilateral measures like the CBAM operate outside the multilateral frameworks negotiated under the Paris Agreement and the UNFCCC. Despite efforts to address the impact of these measures on developing countries in line with CBDR — the core of the Paris Agreement — serious discussions have yet to occur.

There is substantial legal support for the BASIC group’s request to open discussions on implementing these response measures. A COP presidency committed to engaging with the concerns of developing as well as developed countries should include this conversation on the agenda for the upcoming climate summit.

It is clear that developed countries are unlikely to back down in their pursuit of domestic interests within the evolving global green economy without provisions to cushion the impact on developing nations, as illustrated by the recent announcement of the United Kingdom’s CBAM, set to begin in 2027.

Facilitating a shift towards a more globally just trade regime is crucial. It would stabilise international trade and foster cooperation on decarbonisation without marginalising developing countries.

It is therefore important to develop a just transition agenda in trade that minimises the impact of new policies on developing countries, ensuring that the developmental progress in the Global South is not hindered. COP29 must take a proactive stance on this.