On 27 August 2021 a virtual BRICS ministerial meeting on the environment stated its joint opposition to the EU’s proposed carbon border adjustment mechanism and referred to it as discriminatory. The BRICS countries – Brazil, Russia, India, China and South Africa – undertook to cooperate on the issue and included their formal objections to the carbon border tax in a New Delhi statement on environment.

EU carbon border adjustment mechanism

The EU has proposed that a border adjustment will be imposed on imports of carbon-intensive goods. The plan has not yet been finalised but is intended to come into force from 2026. The carbon border adjustment mechanism (CBAM) would aim to equalise the price of carbon between domestic products and imports, to ensure that EU climate targets are not undermined by the relocation of production to countries outside the EU with different policies.

The CBAM has been designed in line with WTO rules and other international commitments by the EU. The EU importers will be required to purchase carbon certificates that correspond to the carbon price that would have been paid if the relevant goods had been produced in line with the EU carbon pricing rules. If a non-EU producer can demonstrate that the appropriate price has already been paid for the carbon used in the production of the imported goods in a third country, the corresponding cost becomes fully deductible for the EU importer. The CBAM is therefore intended to encourage producers in non-EU countries to make their production processes more carbon friendly.

The EU is to gradually phase in the CBAM and at first it will apply only to a limited number of goods that are considered to be at high risk of carbon leakage, including iron and steel, cement, fertiliser, aluminium and electricity generation. From 2023 a simplified CBAM would be introduced requiring importers to report emissions embedded in their goods but without needing to pay a financial adjustment. This would help to ensure the system is rolled out smoothly and would give a chance for consultation with non-EU countries. The full CBAM system would begin to be fully operational from 2026. EU importers would be required to declare on an annual basis the quantity of goods and the embedded emissions in their total goods imported into the EU in the preceding year, and would need to surrender the corresponding amount of CBAM certificates.

Other issues

In addition to expressing their concern about the EU proposals for introducing a unilateral carbon border adjustment the BRICS Ministers agreed to work jointly on other environmental issues including the abatement and control of air and water pollution.