BRICS summit is likely to strongly oppose carbon tax proposed by EU

Brazil, Russia, India, China and South Africa may strongly oppose the proposed Carbon Border Adjustment Mechanism (CBAM) by the European Union at the 13th BRICS Summit on Thursday as the five developing countries will likely be the biggest losers from its implementation.

In a veiled reference to CBAM, BRICS trade ministers last week cautioned that any measure to tackle climate change must be in conformity with multilateral trading rules and shouldn’t put arbitrary restrictions on international trade.

“We underline that all measures taken to tackle climate change must be designed, adopted, and implemented in full conformity with WTO agreements and must not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade,” BRICS trade ministers said in a statement.

As part of a plan to decarbonize economies by 2050, the European Commission earlier this year adopted a proposal for a new CBAM which will put a carbon price on imports of products such as cement, steel, aluminium, oil, chemical and fertilizers so that ambitious climate action in Europe does not push carbon-intensive production outside Europe and instead encourages industry outside the EU to take steps in the same direction. However, many countries are likely to challenge any such action as it would directly hit their industry and exports.

Moreover, considering the cumulative contribution of the European Union and the US to CO2 emissions, countries such as China, Brazil, India, and South Africa continue to argue that the primary obligation to reduce emissions falls upon developed countries.

In a statement from the 30th BASIC (Brazil, South Africa, India and China) Ministerial Meeting on Climate Change held on 8 April, environment ministers expressed “grave concern regarding the proposal for introducing trade barriers, such as unilateral carbon border adjustment, that are discriminatory and against the principles of Equity and principles of Equity and CBDR-RC (Common but Differentiated Responsibilities and Respective Capabilities)”.

In a report, UNCTAD, the UN trade and development body, said CBAM may result in declines in exports in developing countries in favour of developed countries, which tend to have less carbon intensive production processes.

The Russian Federation, China and Turkey are the countries most exposed to the CBAM with the highest levels of exports to the EU in selected sectors likely to be included in the CBAM. However, the effective impact of the CBAM on exports of these sectors to the EU will depend on the level of carbon emissions embedded in exports and the carbon prices already paid in the countries of origin, if any.

From this view, India will be biggest loser ($3 billion) of exports followed by Brazil and South Africa. The theme for this year’s summit is “BRICS@15: Intra-BRICS cooperation for continuity, consolidation and consensus”.

By Asit Ranjan Mishra

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