NEW DELHI, 31 OCTOBER 2026 — The growing use of carbon-border measures is prompting calls for a more structured international framework to address their effects on trade, industrial competitiveness and developing economies. An Indian climate-policy research institute has proposed giving the United Nations climate process a stronger role in examining these issues, alongside existing mechanisms under the World Trade Organization (WTO).
The Council on Energy, Environment and Water (CEEW) published its policy brief, Climate and Trade: Strengthening Cooperation through the UNFCCC, on 30 October. Written by Simran Sukhija and Ravi Shankar Prasad, the study considers how governments could use the United Nations Framework Convention on Climate Change (UNFCCC) to address the economic consequences of climate-related trade restrictions.
The proposal contributes to an international debate over whether carbon-border mechanisms should be considered exclusively as environmental and trade instruments or also examined in the context of climate finance and the distribution of responsibility for emissions reductions.
CBAM raises questions about trade and industrial development
The EU’s Carbon Border Adjustment Mechanism (CBAM) entered its definitive phase on 1 January 2026, establishing carbon-related obligations for specified imports of steel, aluminium, cement, fertilisers, electricity and hydrogen. Its stated purpose is to prevent carbon leakage by aligning the carbon costs of covered imports with those borne by manufacturers in the European Union.
Exporting countries have nevertheless raised concerns about the financial and administrative requirements associated with compliance, including emissions verification, differences between national carbon-pricing systems and potential consequences for industrial development.
These issues are particularly relevant to India, whose steel and aluminium producers supply European manufacturers while operating under production and energy conditions that differ from those in the EU. Indian policymakers have questioned whether carbon-border measures sufficiently recognise differences in economic development and historical responsibility for climate change.
CEEW argues that these concerns warrant a more structured international process rather than being addressed exclusively through bilateral trade negotiations.
UNFCCC proposed as a forum for international cooperation
The research examines government positions expressed during the 64th session of the UNFCCC Subsidiary Bodies in June 2026. The discussions highlighted different approaches to the international treatment of climate-related trade measures.
Developing countries have generally stressed equity, the principle of common but differentiated responsibilities, and the potential for unilateral trade restrictions to affect industrialisation. European and other developed economies have emphasised the environmental objectives of carbon pricing and the need to avoid duplicating existing WTO processes.
Against this background, the paper proposes making more systematic use of the UNFCCC to consider the competing positions. One option would be a structured institutional mechanism to assess the international effects of climate-related trade policies and facilitate technical cooperation between governments.
The proposed arrangement could draw on expertise from the WTO, UNCTAD and other institutions working on international trade and development.
Proposed process envisages further work in 2027 and 2028
CEEW recommends establishing a formal climate-and-trade agenda within the UNFCCC framework. Its proposed timetable builds on international dialogues scheduled for 2027 and 2028, with the longer-term aim of bringing unilateral climate-related trade measures into more regular discussions.
Potential areas of examination include the economic effects of CBAM, technical assistance for developing economies and international cooperation on emissions measurement.
The recommendation remains a research proposal. It does not represent an adopted position of the Indian government, an agreed UN negotiating mandate or a legal challenge that would automatically suspend existing carbon-border measures. Establishing any formal international mechanism would require political agreement among participating governments.
Emissions verification costs link trade policy with climate finance
For exporters in developing economies, the cost of demonstrating compliance is a central concern. Manufacturers supplying goods covered by CBAM must provide appropriate emissions information when European importers seek to use verified actual-emissions calculations.
Companies without established monitoring systems may need to spend more on engineering studies, emissions inventories, software, independent assurance and staff training. These requirements can create a particular burden for smaller suppliers.
CEEW therefore links the treatment of climate-related trade measures with access to climate finance, industrial technology and technical assistance. Its argument is that developing economies should have opportunities to improve industrial emissions performance rather than face additional costs when exporting to markets with established carbon-pricing systems.
The distinction between compliance support and industrial decarbonisation remains important. Funding for emissions monitoring can reduce the administrative expense of demonstrating compliance, but it does not by itself reduce the emissions embedded in manufactured products. Separate investment may be required to modernise production processes, improve energy efficiency or replace high-emission inputs.
India’s carbon-market framework does not automatically remove CBAM obligations
India is developing its domestic carbon-market framework through the Carbon Credit Trading Scheme. However, the existence of a national scheme does not automatically exempt Indian production from EU CBAM requirements.
Under the EU framework, qualifying carbon costs actually paid in the country of origin may affect the calculation of the border-carbon obligation, subject to the applicable conditions and rules. A domestic carbon-market system may therefore create opportunities for recognition of carbon costs, but only where the required evidence and eligibility conditions are met.
This issue is distinct from whether two emissions-trading systems are linked or formally recognised as equivalent. For exporters, the distinction determines how domestic carbon-pricing payments may be treated and what supporting documentation needs to be supplied to European buyers.
Other exporting economies face similar institutional questions
The debate extends beyond India to industrial exporters including Türkiye, Ukraine, Serbia and Montenegro, as well as countries across Africa, Asia and Latin America. Many are developing emissions-monitoring systems or domestic carbon-pricing arrangements while seeking to maintain access to European markets.
A stronger international framework could support more consistent emissions-accounting methodologies, technical cooperation and capacity-building. It would not, however, automatically eliminate differences between national carbon prices or remove the legal obligations applying to EU importers.
The commercial consequences would depend on whether governments agreed on concrete measures affecting verification, financing or the treatment of carbon costs paid outside the EU.
Carbon-border measures move further into climate diplomacy
The CEEW proposal reflects the widening scope of CBAM discussions, which now extend beyond customs compliance into international climate diplomacy.
The European Union regards carbon-border pricing as a means of limiting emissions leakage and maintaining the effectiveness of its domestic climate policy. Some developing countries, meanwhile, regard the mechanism as an additional trade cost imposed by economies with greater financial and technological capacity.
These positions are increasingly influencing discussions on the international governance of industrial decarbonisation. For now, the CEEW research provides a policy framework for possible future negotiations rather than changing the legal status of existing carbon-border charges.
The longer-term issue raised by the study is whether the UN climate system can develop a common approach to carbon-border measures that maintains climate objectives while addressing the costs and competitiveness concerns of exporting economies.
