Europe's climate tax risks opening a new trade war with India at COP31

India has stepped up its opposition to the EU’s carbon border tax, setting the stage for a showdown at next week’s COP31 climate summit in Turkey as Brussels pushes ahead with plans to expand the controversial measure.Indian Environment Minister Bhupender Yadav told local media that New Delhi was ready to defend its industrial interests against "unilateral trade barriers" such as the Carbon Border Adjustment Mechanism (CBAM), the EU's carbon border tax, ahead of the UN climate summit in Antalya.“On CBAM, we will stand by our position.

When it comes to protecting India's interests, that is what we speak about most strongly," Yadav told local media.

The EU's CBAM took effect in January 2026, covering imports of aluminum, cement, fertilisers, hydrogen, iron and steel, effectively obliging operators to pay for the CO2 emissions linked to their production.Shortly after its launch, several EU countries sought temporarily exemptions for fertilisers, warning that the tax would push up prices and could undermine food security. Their request was ultimately not conceded by the European Commission.Brussels argues that CBAM prevents EU manufacturers from being undercut by imports produced under weaker climate rules.

However, developing economies counter that it is an unfair practice, describing it as a unilateral measure that could penalise their industries and restrict their development. While foreign players don't need to pay for their emissions, they need to comply with monitoring and reporting, which they argue is too burdensome.Piyush Goyal, India's commerce minister, recently attacked the economic consequences of CBAM at the Berlin Global Dialogue.“If you have put a CBAM on yourself, you put a 50% import duty to bring steel into your country, you are inviting disaster.

Your cost of living will go up. Your people will be unhappy. Your industry will be out-priced," said Goyal.The timing is significant. Brussels is negotiating plans to extend CBAM to more products, including washing machines and car parts, while tightening rules to prevent companies from circumventing the tax. The next round of political talks among the EU co-legislators, the European Council and the European Parliament, is slated for 20 November.CBAM under international scrutinyHowever, resistance to the EU's carbon border tax is growing across the globe.Canada is trying to negotiate a CBAM exemption with the EU, as the transatlantic partners reinforce closer ties.

The United States is assessing whether the EU's carbon border tax will negatively affect its business operators.Jodey Arrington, the outgoing US House Budget Committee chairman, joined by ten other members of Congress, wrote to US Trade Representative Jamieson Greer, demanding action against EU energy regulations.“These policies, including the EU’s CBAM, Methane Regulation and Corporate Sustainability Due Diligence Directive (CSDDD) discriminate against American producers and suppliers, even as the US maintains some of the highest environmental standards in the world for energy production,” they said.Meanwhile, the United Kingdom is currently in talks with EU officials to link its carbon market to the EU's own Emissions Trading System (ETS), effectively eyeing a CBAM exemption, according to a document seen by Euronews.British Financial Secretary to the Treasury Lord Livermore suggested that linking the two carbon markets would prevent British exporters from facing separate carbon border regimes.“To reduce barriers to trade, the UK and EU are also negotiating a deal to link respective emissions trading schemes, which will create the conditions for mutual CBAM exemptions,” Livermore said in a written parliamentary answer earlier this year.Russia has an open dispute against the EU's CBAM at the World Trade Organisation (WTO) to assess whether the bloc's policy is consistent with WTO rules.Meanwhile, both Russia and China announced on 3 November that they will join forces at the COP31 against the introduction of unilateral trade barriers.While Brussels appears to be facing resistance from its global peers, it is also under pressure from its own industries to soften climate costs.Delays in complying with the methane rules, the ongoing revision of the 2035 ban on new diesel and petrol cars and the EU's ETS are all reflexes of how EU policymakers are rolling back much of what was once hailed as the European Green Deal.Is the EU losing its climate credibility?Struggling to keep climate promises at home, Brussels is now heading to the international stage with a somewhat weaker position, bruised by domestic dissent.

The EU risks arriving at COP31 with a weakened negotiating hand, caught between its ambition to present itself as a global climate leader and the political retreat unfolding at home.Brussels wants the flagship UN climate summit to deliver progress on electrification and moving away from fossil fuels, a decision endorsed at the Santa Marta climate summit, yet EU governments are wrestling with high energy prices, supply concerns and industrial pressure, prompting them to consider expanding domestic refineries.Environmental activists argue that the EU can't credibly push for a global fossil-fuel phase-out while weakening or delaying elements of its own climate framework.Sven Harmeling, head of climate at the NGO Climate Action Network Europe, said the EU should help bridge divides at COP31 instead of deepening them."

The EU cannot ask the rest of the world to deliver while weakening climate action at home or falling short on finance. Leadership in Antalya means doing both: accelerating Europe’s own transition away from fossil fuels and putting its fair share of support on the table internationally," said Harmeling.The COP31 kicks off on 9 November in Antalya, jointly hosted by Turkey and Australia.