Green Protectionism: How the Carbon Tax Adjustment Mechanism at Borders (CBAM) works The EU and the retaliatory measures of trading partners.

Introduction

By mid-2026, the European Union had finally launched and scaled up the Carbon Boundary Adjustment Mechanism (CBAM), turning it from a pilot project into a key instrument of climate and trade policy. Paradoxically, none of the major economies officially declares CBAM a trade war. However, the accumulation of regulatory requirements, shifts in trade flows and mutual claims create an environment where the risk of trade conflicts is growing faster than the ability of international institutions to resolve them.

CBAM Launch and Expansion

By mid-2026, the European Union had finally launched and scaled up the Carbon Boundary Adjustment Mechanism (CBAM), turning it from a pilot project into a key instrument of climate and trade policy. Paradoxically, none of the major economies officially declares CBAM a trade war. However, the accumulation of regulatory requirements, shifts in trade flows and mutual claims create an environment where the risk of trade conflicts is growing faster than the ability of international institutions to resolve them.

CBAM entered into full force on January 1, 2026, covering not only primary goods (cement, steel, aluminum, fertilizers, electricity), but also products with a high "indirect" carbon footprint. From now on, importers are required to: declare the actual carbon footprint of imported products; purchase CBAM certificates at the current price of carbon units in the EU ETS system; report annually on progress in reducing emissions from foreign suppliers.

Already in the first quarter of 2026, the mechanism affected more than 15% of European imports of manufactured goods. According to the European Commission, CBAM revenues in the first three months amounted to €1.2 billion, which were allocated to a special fund to support the "green" transition in emerging economies.

The reaction of key trading partners was immediate. China has launched a national emissions trading system (ETS) with an accelerated schedule to cover export-oriented industries. India has introduced its own carbon footprint requirements for critical goods imported from the EU. The United States has announced the preparation of the "American Climate Compliance Mechanism" (US CAM), which will take into account not only direct emissions, but also the "carbon footprint of logistics."

Synchronization of measures and the action—counteraction loop

A key feature of 2026 was the synchronization of retaliatory measures of trading partners with the expansion of CBAM. In March, the EU announced the inclusion of new categories in the mechanism — chemicals and certain types of plastics. In response, China introduced export quotas for rare earth metals, which are crucial for European "green" energy. Brazil has tightened the requirements for certification of "carbon‑neutral" agricultural products, making it more difficult for European importers to enter its market. Russia has announced the creation of its own carbon accounting system with mutual recognition of certificates with BRICS partners.

This dynamic forms a stable action—counteraction loop, where each new EU measure provokes an asymmetric response, expanding the geography and range of potential trade conflicts. A special role in this dynamic is played by countries whose economies are heavily dependent on carbon-intensive exports to the EU. For them, CBAM is becoming not just a tariff, but a challenge to the entire industrial development model.

Reformatting trade unions

In parallel with the expansion of CBAM, trade alliances are being restructured. The EU is actively promoting the concept of "climate compatible partnerships" by offering preferential terms of access to its market to those countries that implement comparable carbon mechanisms. In 2026, the first agreements of this kind were signed with Canada and Norway, providing for mutual recognition of carbon certificates and coordination of industrial decarbonization policies.

In response, an alternative bloc of countries is being formed, defending the right to a "national decarbonization path." Within the framework of the BRICS, a working group has been launched to harmonize national carbon regulation systems in order to create a common market for carbon units. China and Russia are jointly developing a methodology for accounting for the "absorbing capacity of forests" as an element of the carbon balance, which may become the basis for challenging CBAM calculations in the WTO.

For countries in Africa and the South‑In East Asia, this polarization creates a difficult dilemma. On the one hand, access to the European market requires investments in green technologies. On the other hand, a partnership with an alternative block promises more flexible conditions and financing for traditional industries. According to the United Nations Conference on Trade and Development (UNCTAD), in 2026, the volume of investments from BRICS countries in carbon-intensive projects in Africa for the first time exceeded European investments in green energy.

Technological separation and new standards

The economic dimension of climate protectionism is becoming an independent axis of confrontation. The EU promotes "clean production" standards that require disclosure of data on the supply chain, energy sources and methods of reducing emissions. For small and medium-sized enterprises from developing countries, compliance with these standards is proving to be an unbearable burden.

The answer is the accelerated localization of "green" technologies outside the EU. China is increasing production of solar panels and wind turbines with a carbon footprint below European requirements, positioning them as an alternative to "expensive" European counterparts. India is developing its own certification standards for low-carbon steel based on the use of hydrogen in blast furnaces.

At the same time, the militarization of economic policy in the field of critical minerals is taking place. The EU is building strategic reserves of lithium and cobalt by purchasing them from "reliable" partners. In response, China restricts exports of gallium and germanium, metals that are critically important for European microelectronics.

WTO and the search for compromises: opportunities and limitations

Discussions around CBAM have reached an impasse at the WTO site. The EU insists that the mechanism complies with the rules of the organization, as it equalizes the conditions of competition between local and foreign producers. Opponents point to the discriminatory nature of the requirements and the lack of uniform methods for calculating the carbon footprint.

Attempts to find a compromise through multilateral formats also face difficulties. The OECD's Climate Trade Working Group has been unable to agree on even basic definitions of "low-carbon products" for a year. In these circumstances, countries are increasingly turning to bilateral agreements, creating a mosaic of incompatible standards.

Business association surveys show that 68% of European companies support CBAM as a tool to protect against dirty imports, while 74% of developing country exporters consider it a form of protectionism. This polarization of opinion makes it difficult to find solutions at the global level.

Conclusion and scenarios of the situation development

Thus, the strategic instability in the field of international climate trade by mid‑2026 is not caused by anyone's unidirectional will to conflict, but by a fundamental mismatch between the EU's ambitions for decarbonization and the existing international trade system. The logic of climate protectionism consistently pushes the parties to introduce new restrictions and retaliatory measures, embodied in a continuous action—counteraction loop.

The analysis allows us to identify the following scenarios for the development of the situation:

Freezing of tension. The EU is suspending the expansion of CBAM, focusing on debugging the mechanism for already covered goods. Trading partners refrain from new countermeasures, focusing on adapting to existing requirements. This scenario preserves the status quo, but does not eliminate the root cause: the gap between the EU's climate ambitions and the capabilities of the global economy. Tension remains a "manageable irritant," preserving risks for the next crisis cycle.

Escalation through standards. The EU is expanding CBAM to new product categories and tightening carbon footprint requirements. In response, the BRICS countries are creating an alternative certification system with more lenient criteria. Two parallel trading blocks with incompatible rules are being formed, leading to fragmentation of global supply chains and rising business costs.

A global compromise. A multilateral process for the harmonization of carbon regulation is being launched under the auspices of the WTO. Uniform emission calculation methods are being developed, and a mechanism for mutual recognition of certificates is being created. CBAM is being transformed into a universal tool that promotes decarbonization without creating trade barriers. This scenario requires political will and willingness to make concessions from all sides, which is the least likely in the current circumstances.