- Unilateral trade measures such as the European Union’s Carbon Border Adjustment Mechanism (CBAM), are becoming a major issue during climate negotiations, as seen at COP29 in Baku.
- Developing countries have raised concerns over UTMs, arguing they are unfair and restrict equitable growth opportunities.
- Developed countries pushed back, arguing that the COP is not the right forum to negotiate the issue; however, momentum against such measures is building.
Unilateral trade measures (UTM), or actions taken by countries to restrict or alter trade practices based on environmental standards, are gaining momentum in climate negotiations, as seen in COP29 in Baku.
The issue of UTM popped up in the beginning when China, on behalf of the BASIC group that includes Brazil, South Africa, India, and China, on November 5, submitted a proposal to add the UTM to the agenda of COP29. It was one of the issues that led to agenda fights among parties on the first day of COP29, as they could not build consensus; thus, the adoption of the agenda got delayed for almost eight hours.
Developed countries pushed back and didn’t allow it as an agenda item by saying trade measures don’t belong to the United Nations Framework Convention on Climate Change (UNFCCC). They argued that UTM should be negotiated at forums like the World Trade Organization (WTO).
Although all parties didn’t agree to include it in the agenda item for further negotiation for the next 12 days, consensus was built on the presidential consultation on the issue during the event.
On November 15, the first presidential consultation on the UTM was organised and developing countries considered it progress. “Our intention, in this particular COP, was not to actually close that issue, but to bring it alive and garner more and more support,” said a negotiator from BASIC group, requesting anonymity.
The issue was first raised in Dubai during COP28 in 2023 by the BASIC block, which pursued parties to make it an agenda item for discussion. As it did not garner much support, it was not taken up, but the issue got a space in the Global Stocktake (GST) document in paragraph 154 that speaks against unilateral trade measures.
The BASIC group again pursued the parties in COP29, and G77, the biggest block of negotiating parties with almost 140 countries, supported this. Now, developing countries have UTM as one common point in their agenda, the official said, calling it progress.
Saon Ray, a visiting professor at the Indian Council for Research on International Economic Relations, highlights the long-standing debate about addressing issues at their source. “If it is a trade issue, it should be resolved through the WTO. If it is a climate issue, it should be handled by the UNFCCC,” she explains. The challenge with Carbon Border Adjustment Mechanism (CBAM) lies in its dual nature as both an environmental measure and a trade policy, making it unclear which organisation should take the lead.
Ray argues that since these unilateral trade measures address environmental harm, the UNFCCC or a similar body should handle them rather than the WTO.
Growing global concerns
A report published on November 13 by the WTO highlighted growing evidence of unilateral trade policy decisions driven by the increasing climate crisis and geopolitical tensions, which are adding uncertainty to the global economy.
A major focus of the debate at COP29 was the CBAM proposed by the European Union (EU), set to take effect in 2026. This mechanism will impose a carbon tax on products entering the EU. Several other countries, including Australia and Canada, are considering adopting similar policies. Additionally, the EU has proposed a Deforestation Regulation, scheduled to come into effect in 2025, to prevent the import and sale of products linked to deforestation within its boundary.
As the trend of countries opting for UTM is increasing, the related concern was visible at COP29. India raised the issue time and again in the 12-day event organised in Baku. In the concluding plenary, while criticising the presidency for opting for unfair means to reach a climate finance deal, Indian negotiator Chandani Raina said, “The Global South is being pushed to transit to low-carbon pathways even at the cost of our growth.” She mentioned CBAM and said that such measures imposed by developed countries make the transition difficult.
Before this, on November 18, Leena Nandan, Secretary, Ministry of Environment, Forest and Climate Change (MoEFCC), and part of the Indian delegation at COP 29, raised the issue of UTM twice, once during a high-level ministerial roundtable on pre-2030 ambition and another in a ministerial meeting on just transition, and termed it a coercive measure that restricts trade flows and countries from accessing equitable development opportunities. While delivering India’s national statement on November 19, Union Minister Kirti Vardhan Singh raised the UTM issue again.
India has also said that CBAM-like measures are challenging the transition in developing countries. In its presentation, India highlighted that these UTMs go against key principles of the UNFCCC. Article 3.5 states that measures taken to combat climate change should not create arbitrary or unjustifiable discrimination. Article 3.1 talks about common but differentiated responsibilities (CBDR) and calls for developed countries to take the lead in fighting climate change. Article 3.4 states that measures to protect against climate change should be appropriate to the specific conditions of each Party. The presentation mentions other articles, too.
India argued that UTMs transfer the financial burden of mitigation to developing countries, undermining their ability to grow sustainably and effectively address climate challenges by targeting their exports.
Ray explains that these measures target energy-intensive sectors such as steel, cement, and aluminium. Meeting the new requirements will require advanced technologies and significant investments to comply with the prescribed standards. Such technologies are not readily available domestically and would need to be imported. While large firms might manage this due to their resources, the bigger challenge lies with medium and small enterprises, particularly in the iron and steel industry, which lack the capacity to afford these technologies. As a result, “Our exports in iron and steel and aluminium are likely to face a significant barrier,” she says.
Momentum building
The issues of UTM are not limited to the annual climate conference organised by UNFCCC but are raised from several other platforms, too.
When COP29 was ongoing in Baku, world leaders met in Brazil as part of the G20 Summit on November 18-19, and the issue was raised there too. The G20 communique said, “Measures taken to combat climate change, including unilateral ones, should not constitute a means of arbitrary or unjustifiable discrimination or a disguised restriction on international trade.” G20 is a group of twenty intergovernmental forums of the world’s major economies.
Similarly, the sixteenth summit of BRICS, a grouping of major emerging economies including Brazil, Russia, India, China, and South Africa, held in October in Kazan, Russia, also raised the issue. The Kazan Declaration advocated for a rules-based system and rejected “unilateral trade-restrictive measures that are inconsistent with WTO rules.”
As the trend of countries adopting UTM grows, experts say the debate about it will intensify further.
Shreekant Gupta, former Professor at the Delhi School of Economics, University of Delhi, feels that while CBAM-like protectionist measures are unjustifiable, they can be viewed as both a threat and an opportunity. “These measures can incentivise countries to adopt greener practices. While we don’t endorse these measures, they can motivate us to speed up our decarbonisation even more and implement initiatives like emissions trading, sending a strong signal that we are serious about reducing greenhouse gases,” he said.
Highlighting the growing trend of countries adopting emissions trading, Gupta noted that such measures could strengthen the bargaining power of developing countries, who can say, “Look, we are now doing emissions trading, so we are meeting you halfway. Now, you come forward with the finance and technology.” However, he criticised the outcome of COP29, where developed countries agreed to just $300 billion in climate finance—a commitment he described as extremely inadequate and unacceptable.
The outcome of the presidential consultation on unilateral trade measures is not yet known, but there are expectations that the host country may publish a report. With this, all attention will shift to Brazil, the next host of the climate COP, scheduled just before the full implementation of CBAM.
Read more: COP29 ends with a $300 billion promise overshadowed by distrust and discontent
Banner image: Activists protest at the COP29 venue, urging developed countries to acknowledge their role in the climate crisis. Image courtesy of COP29 Azerbaijan Presidency via flickr.
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