BRUSSELS, Belgium – A landmark European environmental policy designed to tax carbon-intensive imports is emerging as a major source of tension as world leaders gather for the UN’s , climate summit in Brazil this week.

The European Union’s Carbon Border Adjustment Mechanism (CBAM), which critics have dubbed a “carbon tax” on imports, is raising concerns among global trading partners who view the policy as protectionist despite Brussels’ claims that it will help combat climate change worldwide.

The dispute threatens to overshadow substantive discussions on climate finance and emissions reduction at the crucial summit, according to policy experts monitoring the negotiations.

Several countries, including China, India and Bolivia, are pushing to include “unilateral trade measures” on the COP30 agenda in what appears to be a direct challenge to the EU mechanism, which has been testing since 2023 and will become fully operational in 2026.

Growing financial impact

CBAM targets imports of carbon-intensive goods including steel, aluminum, cement, fertilizers, electricity and hydrogen. Under the system, importers must declare the CO2 emissions embedded in foreign-produced goods and purchase emission certificates if those emissions exceed EU standards.

With EU carbon prices currently trading between 70 and 80 euros per metric ton and expected to surpass 100 euros by 2030, the financial implications are substantial.

“That could nearly double the price of a tonne of steel,” said Pierre Leturcq, a policy expert at the Institute for European Environmental Policy.

The mechanism aims to prevent “carbon leakage” — the practice of companies relocating production to countries with weaker climate regulations to avoid emissions costs. EU producers already face these costs under the bloc’s internal emissions trading system.

Brussels projects CBAM will generate 1.4 billion euros ($1.2 billion) annually starting in 2028 and is considering expanding the mechanism to additional sectors, including automotive and aerospace industries.

International pushback

The policy has drawn sharp criticism from major trading partners, most notably U.S. President Donald Trump, who has repeatedly attacked the EU’s climate agenda and demanded exemptions for American firms.

“What he really dislikes is having a worldview imposed on him,” Leturcq said. “His opposition to CBAM is part of a broader rejection of environmental policy altogether.”

Beyond the United States, developing nations have expressed fears that wealthy countries are shifting the financial burden of emissions reductions onto poorer nations rather than taking responsibility themselves.

However, EU lawmaker Pascal Canfin, who helped shepherd the legislation through the European Parliament, disputed those concerns.

“CBAM mainly affects trade with industrialized countries – the U.S., Canada, China, Russia and Ukraine for fertilisers,” Canfin said. “It’s a non-issue for developing nations.”

Communication gap

Environmental advocates argue that much of the opposition stems from misunderstanding about the policy’s objectives.

“The instrument has been misunderstood or misinterpreted by these trade partners,” said Elisa Giannelli of the E3G environmental think tank. “Nobody really took care of explaining to them what this is about.”

The EU promotes CBAM as a “virtuous” tool that encourages greener practices worldwide by creating economic incentives for cleaner production methods.

Summit concerns

Policy experts worry that the carbon border tax controversy could detract from more pressing climate discussions requiring hundreds of billions of euros in investment.

Leturcq cautioned that while CBAM represents an important policy innovation, its actual impact on global emissions will be “fairly modest” compared to the scale of climate action needed.

To address developing nation concerns, some experts have suggested the EU dedicate portion of CBAM revenues to support decarbonization efforts in poorer countries.

Global momentum

Despite the criticism, the carbon border tax concept appears to be gaining traction internationally. Britain plans to implement its own mechanism by 2027, and other countries are considering similar measures.

Democratic Senator Sheldon Whitehouse, one of the U.S. Congress’s most vocal climate advocates, has praised the EU’s approach as crucial for raising global pollution costs.

“If that persists, and if that expands with the UK, Australia, Canada, others adding to it, a pathway to climate safety begins to emerge,” Whitehouse recently told reporters. “Without that, it’s game over.”

As COP30 negotiations begin, the success or failure of efforts to address CBAM concerns could significantly influence the summit’s ability to achieve meaningful progress on global climate cooperation.

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