BASIC countries insist on discussing European CBAM

The BASIC countries (Brazil, South Africa, India, and China) insist on discussing a European mechanism for transboundary carbon adjustment, S&P Global reports.

In particular, the first plenary session of the UN Climate Conference COP29 in Baku was interrupted because these states requested that “climate change-related unilateral trade-restrictive measures” such as CBAM be included in the agenda.

However, the presiding country decided that the topic would be discussed informally.

The dispute highlights the tensions between countries with different climate agendas and limited time to agree on key issues.

Many developing countries that are heavily impacted by CBAM have expressed their concerns and criticism on the sidelines of previous climate change conferences. However, the UN did not include this part in the official agenda. The EU has also insisted that the issue is trade-related and should be discussed in the WTO.

In July of this year, the BASIC group stated that the steps taken by rich countries to introduce border carbon taxes and trade-distorting subsidies are “discriminatory.”

According to some analysts and COP delegates, the intersection of climate and trade policy is becoming increasingly inevitable, pushing the UN Climate Conference to create a formal and appropriate platform for discussions.

Many developing countries, especially BASIC countries, are critical of CBAM. Much of their exports go to the EU, making these economies vulnerable. South Africa has repeatedly called the mechanism discriminatory, India has considered retaliatory measures, and China has raised concerns in the WTO.

An analysis by S&P Global Commodity Insights showed that Brazil, Canada, South Africa, and Turkey will be the most vulnerable to the CBAM. The metallurgical and mining industries will be most affected.

Given the future expansion and tightening of CBAM regulations, this tool will lead to a restructuring of global supply chains. This will happen if the EU’s trading partners are not prepared to meet stricter climate ambitions. Access to the European market for companies from third countries will decrease, while competition in markets that do not have their own mechanisms will increase. This is stated in a recent GMK Center study “How the European CBAM could weaken Ukraine’s economy”,