E-Paper
BRICS, CBAM and the making of a new carbon trade order
This article is authored by Amrendra Pratap Singh, public policy scholar, New Delhi.
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The New Delhi Declaration adopted at the 18th BRICS Summit places climate-linked trade measures at the centre of the Global South’s economic diplomacy. By explicitly opposing “unilateral, punitive, discriminatory and protectionist measures… such as carbon border adjustment mechanisms”, the document signals that BRICS countries are no longer willing to accept climate policy instruments designed in Brussels or London without contestation. This stance acquires particular significance in the context of the European Union’s definitive CBAM regime, which entered its operational phase on January 1, 2026, and the United Kingdom’s planned CBAM from January 1, 2027.
For India, the CBAM question is not merely about environmental regulation but about the future structure of its industrial exports. The EU mechanism covers cement, iron and steel, aluminium, fertilisers, electricity and hydrogen, and imposes a carbon cost on imports based on the emissions generated during production. Indian steel, aluminium and cement producers, many of whom still rely significantly on coal-based energy, could face higher compliance costs and reduced price competitiveness in European markets unless they accelerate decarbonisation and strengthen emissions reporting systems.
The BRICS response combines principled opposition with an attempt to construct alternative institutional arrangements. The New Delhi Declaration welcomes the implementation of a Memorandum of Understanding on the BRICS Carbon Markets Partnership, which is intended to facilitate capacity building, exchange of experiences and alignment of carbon markets with national climate strategies. The declaration also links carbon market cooperation to broader concerns about climate finance, debt sustainability and technology transfer, thereby situating carbon pricing within a development-oriented framework rather than treating it as a standalone mitigation tool.
This approach reflects a deeper strategic calculation. BRICS countries argue that unilateral border carbon measures, while framed as climate policy, function in practice as trade barriers that impose disproportionate costs on developing economies. At the same time, they seek to ensure that emerging markets retain policy space to determine their own energy transitions, including the continued role of fossil fuels alongside renewable sources and nuclear energy, as the New Delhi Declaration notes. The underlying message is that climate ambition cannot be divorced from questions of equity, fiscal capacity and historical responsibility.
India’s position within this debate is shaped by recent developments in its domestic carbon market architecture. The UK has included India’s Carbon Credit Trading Scheme in its indicative list of qualifying overseas carbon pricing mechanisms under CBAM regulations. This recognition allows UK importers of eligible Indian goods to claim relief for the carbon price already paid under the CCTS, subject to verification requirements. In principle, this reduces the risk of double taxation and enhances the international standing of India’s carbon pricing framework.
However, the practical benefits of this recognition are likely to be constrained by several factors. The effective carbon price under the CCTS may be substantially lower than the implicit carbon price applied in the UK, which would limit the extent of CBAM liability reduction for Indian exporters. More significantly, compliance with CBAM requirements demands robust measurement, reporting and verification of product-level emissions, which poses particular challenges for micro, small and medium enterprises that form an important part of affected supply chains. The CCTS currently focuses on large, energy-intensive installations, and its direct coverage of MSMEs remains limited.
This is also where the question of interoperability becomes central. If Indian exporters are to receive meaningful recognition for carbon prices paid under the CCTS, India and the UK must be able to establish that their systems use sufficiently comparable methods for defining, measuring, reporting and verifying embedded emissions. Interoperability does not require identical carbon markets or a single global carbon price; it requires different systems to communicate with one another through compatible methodologies, reliable data and mutually intelligible standards. Without it, recognition of the CCTS may remain formally available but practically difficult to use, particularly for smaller firms that cannot afford repeated assessments under separate national regimes. The UK’s recognition of India’s scheme therefore illustrates both the value of interoperability and the institutional work still required to make it effective.
These constraints point to the need for a more comprehensive policy response. First, India must accelerate the maturation of its carbon market by broadening sectoral coverage, clarifying long-term price signals and aligning MRV standards with international expectations. Second, industrial decarbonisation efforts must be intensified through targeted support for green hydrogen in steel production, alternative clinker formulations in cement manufacturing and increased renewable energy adoption in aluminium smelting. Third, India should leverage BRICS cooperation to develop common approaches to emissions tracking and certification that could reduce transaction costs for exporters facing multiple jurisdictional requirements.
The broader implication of the BRICS stance on CBAM extends beyond immediate trade concerns. It reflects an emerging consensus among major developing economies that climate governance cannot be dictated solely by advanced industrialised countries. The New Delhi Declaration’s emphasis on additional, adequate and predictable climate finance for adaptation, along with technology transfer and capacity building, underscores the expectation that developed countries must fulfil their longstanding commitments under the UNFCCC framework. Without such support, unilateral border measures risk being perceived as instruments of green protectionism rather than genuine climate action.
India’s diplomatic challenge lies in balancing its climate commitments with its development imperatives. While opposing discriminatory trade measures, New Delhi must also demonstrate credible progress on industrial decarbonisation to maintain market access in key export destinations. The BRICS Carbon Markets Partnership offers a platform for collective action, but its success will depend on the willingness of member countries to move beyond rhetorical opposition and develop practical mechanisms for cooperation.
The evolution of the global carbon trade order is now underway, with CBAM regimes serving as early indicators of how climate policy and trade rules will intersect in the coming decades. India’s response to this emerging architecture will shape not only its export competitiveness but also its role in defining the terms of a just and equitable energy transition. The New Delhi Declaration has articulated a clear position against unilateral carbon border taxes, but the real test lies in translating this stance into concrete policy actions that enhance both climate ambition and industrial resilience.
(The views expressed are personal)
This article is authored by Amrendra Pratap Singh, public policy scholar, New Delhi.
