NEW DELHI, 31 OCTOBER 2026 — The Council on Energy, Environment and Water (CEEW) says the expanding use of carbon-border measures is driving calls for a more structured international framework. The institute points to impacts on trade, industrial competitiveness and developing economies. It also proposes giving the United Nations climate process a stronger role in examining these issues alongside existing mechanisms under the World Trade Organization (WTO).
CEEW released the policy brief Climate and Trade: Strengthening Cooperation through the UNFCCC on 30 October. The study, authored by Simran Sukhija and Ravi Shankar Prasad, examines how governments could use the United Nations Framework Convention on Climate Change (UNFCCC) to address economic consequences of climate-related trade restrictions. It also feeds into debate over whether carbon-border mechanisms should be treated only as environmental and trade tools or considered in relation to climate finance and emissions responsibility distribution.
EU CBAM enters definitive phase with obligations for covered imports
The European Union’s Carbon Border Adjustment Mechanism (CBAM) moved into its definitive phase on 1 January 2026. Under the scheme, carbon-related obligations apply to specified imports of steel, aluminium, cement, fertilisers, electricity and hydrogen. The EU describes CBAM’s purpose as preventing carbon leakage by aligning carbon costs for covered imports with those borne by manufacturers in the European Union.
Exporting countries have raised concerns about compliance requirements tied to CBAM. These include emissions verification, differences between national carbon-pricing systems and potential effects on industrial development. The issues are described as relevant to India because Indian steel and aluminium producers supply European manufacturers while operating under production and energy conditions that differ from those in the EU.
CEEW says Indian policymakers have questioned whether carbon-border measures account for differences in economic development and historical responsibility for climate change. The institute argues that these concerns call for a more structured international process rather than relying only on bilateral trade negotiations.
UNFCCC session discussions highlight differing views on climate-related trade measures
The research reviews government positions raised during the 64th session of the UNFCCC Subsidiary Bodies in June 2026. It reports that discussions reflected different approaches to how climate-related trade measures should be handled internationally. Developing countries, according to the paper, have generally emphasised equity and the principle of common but differentiated responsibilities.
The paper also notes that developing countries have pointed to risks that unilateral trade restrictions could affect industrialisation. In contrast, European and other developed economies have highlighted environmental objectives of carbon pricing and the need to avoid duplicating existing WTO processes.
Against this backdrop, CEEW proposes making more systematic use of the UNFCCC to address competing positions. One option outlined is a structured institutional mechanism to assess international effects of climate-related trade policies and support technical cooperation between governments.
Potential institutional design draws on WTO and UNCTAD expertise
CEEW suggests that any proposed arrangement could draw on expertise from the WTO, UNCTAD and other institutions focused on international trade and development. The institute recommends establishing a formal climate-and-trade agenda within the UNFCCC framework. Its proposed timetable builds on international dialogues scheduled for 2027 and 2028.
The longer-term aim described is bringing unilateral climate-related trade measures into more regular discussions. CEEW identifies possible areas for examination including economic effects of CBAM, technical assistance for developing economies and international cooperation on emissions measurement.
The institute characterises its recommendation as a research proposal rather than an adopted position by the Indian government. It also states it is not an agreed UN negotiating mandate or a legal challenge that would automatically suspend existing carbon-border measures. Any formal international mechanism would require political agreement among participating governments.
Verification requirements link CBAM compliance costs with climate support
CEEW highlights compliance costs for exporters in developing economies as a central concern. It says manufacturers supplying goods covered by CBAM must provide emissions information when European importers seek to use verified actual-emissions calculations.
The brief adds that firms without established monitoring systems may need spending on engineering studies, emissions inventories, software, independent assurance and staff training. It states these requirements can create a particular burden for smaller suppliers.
CEEW links how climate-related trade measures are treated with access to climate finance, industrial technology and technical assistance. The argument presented is that developing economies should have opportunities to improve industrial emissions performance rather than face additional costs when exporting to markets using established carbon-pricing systems.
The paper distinguishes between compliance support and industrial decarbonisation. It says funding for emissions monitoring can reduce administrative expenses related to demonstrating compliance but does not by itself reduce emissions embedded in manufactured products. It also notes that separate investment may be needed to modernise production processes, improve energy efficiency or replace high-emission inputs.
India’s Carbon Credit Trading Scheme does not automatically remove CBAM obligations
CEEW states India is developing its domestic carbon-market framework through the Carbon Credit Trading Scheme. However, it says having a national scheme does not automatically exempt Indian production from EU CBAM requirements.
The brief reports that under the EU framework qualifying carbon costs actually paid in the country of origin may affect calculation of the border-carbon obligation. It notes this depends on applicable conditions and rules, meaning recognition of carbon costs may be possible only where required evidence and eligibility conditions are met.
CEEW says this point is distinct from whether two emissions-trading systems are linked or formally recognised as equivalent. For exporters, it adds that the distinction affects how domestic carbon-pricing payments may be treated and what supporting documentation must be provided to European buyers.
Broader regional exporters including Serbia face similar institutional questions
The debate extends beyond India to industrial exporters including Türkiye, Ukraine, Serbia and Montenegro. CEEW also references countries across Africa, Asia and Latin America seeking continued access to European markets while developing emissions-monitoring systems or domestic carbon-pricing arrangements.
The institute says a stronger international framework could support more consistent emissions-accounting methodologies along with technical cooperation and capacity-building. It also states such a framework would not automatically eliminate differences between national carbon prices or remove legal obligations applying to EU importers.
CEEW reports that commercial outcomes would depend on whether governments agree on concrete measures affecting verification, financing or treatment of carbon costs paid outside the EU.
CBAM discussions extend into climate diplomacy within UN governance debates
CEEW frames its proposal as reflecting wider CBAM discussions moving beyond customs compliance into international climate diplomacy. It says the European Union views carbon-border pricing as limiting emissions leakage while maintaining effectiveness of its domestic climate policy.
The brief adds that some developing countries view CBAM as an additional trade cost imposed by economies with greater financial and technological capacity. It says these positions are increasingly shaping discussions on international governance of industrial decarbonisation.
For now, CEEW describes its research as providing a policy framework for possible future negotiations rather than changing the legal status of existing carbon-border charges. It also highlights a longer-term question about whether the UN climate system can develop a common approach to carbon-border measures that maintains climate objectives while addressing costs and competitiveness concerns faced by exporting economies.