Gina Huang | Originally Published: 27 October 2026
This article is adapted from a version that was originally published in Foreign Policy in Focus.
Developed countries pledged to support poorer countries in their green transitions. Under a new EU policy, they’re applying penalties instead — and the U.S. may follow suit.
The world needs to burn less carbon. As a result, many countries have moved to limit the emissions produced within their own borders, but some are also grappling with the emissions produced by their imports. The resulting policies walk a line between environmentalism and protectionism—and may end up punishing some of the Global South countries most impacted by, yet least responsible for, climate change.
This year, the EU began imposing the world’s first carbon border adjustment mechanism (CBAM): essentially a tariff on imported products that have carbon-intensive production, matching the EU’s existing internal carbon restrictions that put a price on carbon emissions. Following a three-year transition period when importers reported their emissions, 2026 marked the start of the carbon tax — and the renewal of a debate on equity in climate justice.
CBAM proponents have touted it as a necessary measure to advance environmental objectives, leading to similar proposals in the United Kingdom and the United States (Glass 2026; Rasool, Reinsch, and Denamiel 2024). Its critics, on the other hand, have expressed concern about economic consequences that will be primarily borne by developing countries (Weise 2023).
Green Protectionism
In its current phase, CBAM targets specific high-emitting sectors: cement, aluminium, fertilizers, iron and steel, hydrogen, and electricity. The carbon tax operates in accordance with the EU Emissions Trading System (EU ETS), a form of cap and trade applied within the EU.
The EU’s cap and trade system sets a maximum cap on carbon emissions and requires emitters to purchase allowances to cover emissions, which can then be traded by allowance holders. With CBAM, EU importers must purchase CBAM certificates at the price of EU ETS allowances, effectively applying the existing EU standard for the cost of emissions onto non-EU states.
In the context of the EU’s climate goals, CBAM primarily serves to address carbon leakage: where emissions are directed to countries with fewer environmental regulations instead of being meaningfully reduced — either by businesses offshoring carbon-intensive processes or by increasing high-emission imports to avoid costs incurred by adhering to domestic emission-cutting efforts (Rogal 2021).
As a result, CBAM has also been promoted as a measure to protect the competitiveness of industry in the EU (Gupte 2026). In this sense, CBAM is as much a matter of trade policy as it is environmental, with the former becoming the main target of international condemnation. The current structure of CBAM as a protectionist policy produces a zero-sum relationship between the economic competitiveness of the EU and exporting countries, disproportionately harming those in the Global South.
Penalizing Poor Countries
CBAM presents exporting countries with an ultimatum: reduce production emissions or face sharp economic consequences. The problem here is not pressuring other countries to commit to reducing emissions, but that the application of CBAM does not acknowledge countries’ varying capacities to accomplish this aim.
Penalizing countries that do not have the financial means to reduce production emissions—as they cannot rapidly transition to lower-emission infrastructure—only perpetuates the economic inequality that restricted them to begin with.
There are massive infrastructure costs for transitioning to low-emission technology, which developing countries have difficulty accommodating (Broom 2022). Moreover, the Global North hasn’t made it easy to access this technology. Environmentally sustainable technologies get locked behind patents with costly licensing and limited resources to implement (Tyhurst 2023).
There are further logistical issues that complicate the adjustment to CBAM for all exporters, such as calculating and reporting emissions, which pose a particular threat to smaller firms. While enforcing this aspect may be a headache for wealthy and low-income countries alike, poorer countries would face a greater financial strain . Exporters could respond by enacting retaliatory policies, but poorer countries have less leverage to do this effectively (Lanktree and Gus 2025).
CBAM also incentivizes exporting countries to strengthen their own domestic carbon markets to avoid incurring a fee through CBAM once products reach importers (Tarr et al. 2023). CBAM stipulates that carbon prices paid prior to importing can be deducted, meaning countries with an existing robust emissions trading system can better mitigate potential losses. China, for example, can reduce losses by 30-60 percent under its carbon pricing scheme (Li et al. 2026). Countries with weaker systems or none at all, however, are left at a steep disadvantage (Anand 2025).
Trading Aid for Tariffs
Imposing a tariff in the name of climate justice is not only discriminatory, but deeply hypocritical for the Global North.
Developed countries, including both the EU and its member states, have failed to deliver on their commitments to climate finance under the Copenhagen Accord, which could have supported the financial burden of transitioning to green technologies (Timperley 2021). Through the Copenhagen Accord, developed nations pledged to provide USD 100 billion annually to support developing countries in combating climate change. Though they agreed to hit this target by 2020, this promise has been left unfulfilled year by year.
Even after the OECD reported that the $100 billion goal was finally met in 2022, donor countries received backlash for providing loans and not grants (OECD 2024; Gour 2024). EU member states France, Austria, and Spain heavily rely on loans as a form of financing, which risks debt-trapping developing countries and jeopardizes the long-term maintenance of a green transition (Thériault 2023).
Framing CBAM as a crucial measure to uphold the Paris Agreement also reflects selective adherence to international agreements. Opponents have accused CBAM of violating Article 3.5 of the UNFCCC, which discourages climate initiatives that serve as a “disguised restriction on international trade,” especially unilateral measures (United Nations 1992). Both informal challenges and formal disputes have been brought against the EU at the WTO, following similar criticisms alleging that CBAM violates WTO rules against discriminatory practices (Delille and Fustes 2025; Le Blanc and Mendoza, 2023).
The EU’s CBAM comes at a time of rising protectionist trade policy among states in the Global North. What distinguishes CBAM is its green veneer, the hallmark of green protectionism (The Economist 2023). As the EU fully rolls out CBAM, international actors look to carbon border adjustments as a model for climate policy — and the U.S. has already taken note.
A Bad Model for Climate Action in the U.S.
Carbon border adjustments have historically had bipartisan support in the United States (Siegel 2022).
Politicians have made no secret of the geopolitical motivations behind that support. Democratic Senator Chris Coons described the policy as a tool “that will bring us closer to our allies and disadvantage some of our adversaries,” while Republican Senator Kevin Cramer has called it an “America-first climate policy” that “Donald Trump should love.” Observers have noted that CBAM takes after Trump’s tariff policies, just with better marketing (Khare and Mohan 2026).
While there’s been nothing ‘green’ about the Trump administration’s aggressive tariff regime, the U.S. also has a history with green protectionism.
Though the Inflation Reduction Act (IRA) under Biden was the largest U.S. climate investment in history, it was also “widely believed to be a part of the U.S. strategy to weaken China’s dominance in the green economy,” World Finance reports (Levinson et al. 2024; Katsomitros 2023). The IRA greatly privileged U.S. production by providing tax credits for electric vehicles that are assembled in North America using U.S.-sourced critical minerals (Orakhelashvili 2024).
The IRA, similarly to CBAM, was met with global backlash — and also pushed other states to adopt their own protectionist policies (Worland 2023). The Trump Administration’s “Big Beautiful Bill” subsequently ended the IRA’s tax credits for electric vehicles, although it preserves some favorable tax treatment for U.S.-made vehicles overall (Buffie 2025; Clean Energy Credit Union 2026).
Attempting to address trade and climate simultaneously has led to the undercutting of progressive climate action in favor of geopolitical interests. As the country with the highest historic emissions, focusing on advancing national commercial interests while failing to provide adequate climate finance abroad reflects the continued U.S. neglect of equity in climate justice (Herz 2022).
In Europe, CBAM normalizes exerting discriminatory unilateral measures in the name of environmentalism. It would be a mistake to replicate the model in the United States when conditions become more favorable to climate action.
As the international community grapples with the growing climate crisis, developed countries in the Global North must examine their role in supporting a global green transition. Pursuing truly progressive climate policy involves the dismantling of historic tools of empire that maintain the North-South divide, rather than utilizing them to enact discriminatory unilateral measures.
Unless an equal playing field is established in the global economy, policies like CBAM will only deepen existing economic dependencies. If wealthy states are to live up to their climate commitments under international agreements, equity has to be at the forefront of their climate policy.
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