While the tariff and trade has taken the central stage in the current international discourse, there are other trade measures such as CBAM silently spreading its wings. Retreat of the United States (US) from the Paris Climate Accord and the upsurge in global environmental trade measures like EU carbon border adjustment mechanisms (CBAM) have worsened the already paralysed global climate governance. CBAM, a controversial trade protection measure, can significantly distort the global trade order and alter the industrial practices of developing countries in their effort towards industrial decarbonisation and global trade competitiveness. Premised as a mechanism to plug the carbon leakage that may spill from the EU to other countries, as the latter have lax domestic emission standards, the mechanism projects to accelerate the decarbonisation efforts across countries through the imposition of carbon prices on exports to the EU.

For instance, while the EU’s carbon price hovered around €80-100 per ton of CO2, in most of the other parts of the world, it remains below €10 per ton, which could be a major factor driving the relocation of the emission-intensive industries away from the EU. To start with, the mechanism aims to cover six high-emission intense sectors: cement, iron and steel, aluminum, fertilisers, electricity, and hydrogen, aiming at minimising the significant risk of carbon leakage from the EU region.

Going against the current of multilateralism

CBAM is espoused by many countries like Brazil, China, and India as a trade barrier and is touted as a........

© The Pioneer