Carbon Border Tax Dispute Causes Delay in UN Climate Talks Opening Day

Developing nations, such as China and India, clashed with wealthier countries over the inclusion of unilateral trade measures, like the European Union's carbon border tax, in the UN climate talks agenda. This disagreement delayed the formal start of the conference on Monday. While agenda disputes are common at these conferences, this one holds particular importance due to the limited time available for countries to agree on a new climate finance goal.

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The conference began with Azerbaijan, this year's host, urging all nations to swiftly resolve outstanding issues to establish a new climate finance target. UN climate chief Simon Stiell emphasised that reaching an agreement is in every nation's self-interest. However, proceedings were paused as delegates negotiated the agenda. The opening session faced significant delays as developed and developing countries debated whether to include unilateral trade measures, such as the EU's Carbon Border Adjustment Mechanism (CBAM), as an agenda item at COP29.

Unilateral Trade Measures and Economic Concerns

China, representing the BASIC group of countries, submitted a proposal last month requesting that COP29 address unilateral trade measures. The CBAM is the EU's proposed tax on energy-intensive products like iron, steel, cement, fertilisers, and aluminium imported from countries such as India and China. This tax is based on carbon emissions generated during production. The EU argues that this mechanism levels the playing field for domestically manufactured goods adhering to stricter environmental standards and helps curb emissions from imports.

However, developing nations argue that such taxes could harm their economies and make trade with the EU costly. They contend that under UN climate rules, no nation should impose emission reduction strategies on others. The BASIC group's proposal highlights broader concerns about industrial policies in developed countries like the US and EU. These nations are increasingly favouring cost-competitive green products, such as electric vehicles and solar panels made in China.

Climate Finance vs Global Stocktake Outcomes

Another contentious issue is whether COP29 should prioritise climate finance or discuss all global stocktake outcomes. Countries like India and China, along with the African Group, want a focus on climate finance. In contrast, developed nations including the US, UK, and EU advocate discussing all outcomes, including mitigation and transitioning away from fossil fuels.

Meena Raman from the Third World Network stated that the dialogue should focus on finance but developed countries resist prioritising funding to help developing nations adapt to climate change. "They are saying the dialogue should cover all Global Stocktake outcomes from COP28 with more emphasis on mitigation," Raman said during a press conference. "They are trying to divert attention from the crucial issue of climate finance," she added.

Impact of CBAM on Developing Economies

Finance Minister Nirmala Sitharaman recently described CBAM as unilateral and arbitrary, warning it could harm India's industries and disrupt international trade balance. According to Delhi-based think tank Centre for Science and Environment (CSE), CBAM will impose an additional 25% tax on carbon-intensive goods exported from India to the EU. This tax burden would represent 0.05% of India's GDP.

The proposal by BASIC reflects deep concerns among many developing countries about industrial policies in developed regions. Li Shuo from China Climate Hub stated that this approach will inevitably delay global climate action. "This approach will inevitably delay global climate action; there's no question about it," Li Shuo said.

The ongoing discussions highlight significant differences between developed and developing countries regarding trade measures and climate finance priorities. Resolving these issues remains crucial for achieving meaningful progress at COP29.