EU-CBAM: The way forward

Developing countries face a disproportionate impact from climate change, despite being historically least responsible for it.

- RAJEEV KHER & ANSHUMAN GUPTA

They are equally subjected to climate measures initiated by developed countries, with transborder developmental consequences. The Carbon Border Adjustment Mechanism (CBAM) is one such measure that compromises the developmental pursuits of most developing nations.

Incorporating poor countries' developmental aspirations becomes even more critical in the backdrop of minimal atmospheric space left to accommodate carbon emissions for meeting the Paris Agreement target of limiting temperature increase within 2 or 1.5 degrees Celsius above pre-industrial levels. In order to meet the Sustainable Development Goals (SDGs) set by the United Nations by 2030, equity-based development at all levels is of critical importance.

The economies of least developed countries (LDCs) are fragile, with little diversification and shallow export baskets. Many LDCs export a substantial share of their goods to the EU, with these exports often concentrated in product areas covered by the CBAM, which constitute a significant portion of their gross domestic product (GDP). For example, nearly 60 per cent of Mozambique's and 29 per cent of Zambia's total exports to the EU consist of CBAM-covered commodities. In 2023, Mozambique's CBAM-covered exports accounted for approximately 6 per cent of its GDP, with over 50 per cent of its total aluminium exports destined for the EU. India also exports a significant share of CBAM-covered goods to the EU, comprising about 11 per cent of its total exports to the region.