BELÉM, Brazil — The European Union is under pressure to defend its new carbon tariff scheme as trade tensions swamp this year’s global climate talks.

Long-simmering diplomatic frictions over the upcoming levy are reaching boiling point in the tropical heat of Belém, with some developing countries pushing for the COP30 conference to effectively condemn the bloc’s green trade measures as protectionist.

Trade has taken center stage at this summit, alongside traditional sticking points such as finance, as exporting countries fret over the carbon levy’s looming enforcement on Jan. 1 —together with other new EU policies seeking to combat global deforestation or methane pollution, as well as tariffs on climate-relevant products such as Chinese electric vehicles.

“All parties need to cooperate to avoid unilateral measures that might damage international collaboration,” Liu Zhenmin, China’s climate envoy, told POLITICO on Monday. “The world needs a very climate-friendly environment for investment.”

While he did not specifically mention the EU, diplomats and civil society observers say there is no question that trade discussions at COP30 have largely targeted the bloc’s measures, particularly the levy, officially known as the carbon border adjustment mechanism (CBAM).

To resolve the issue, the Brazilian hosts of this year’s conference on Tuesday put forward a number of suggestions that includes an option to regularly assess measures such as CBAM at United Nations climate talks — anathema to the EU, which is putting up a fight. 

EU climate chief Wopke Hoekstra said at a press conference on Monday he was “more than happy” to discuss CBAM, but would “not be lured into the suggestion” that the measure is aimed at restricting trade. 

European negotiators in Belém said they fiercely reject any attempt at using U.N. climate talks to settle trade disputes, and expressed discomfort at being singled out.

With an eye on China’s decision to curb exports of raw materials, they have also suggested that doing so would not be in the interest of other countries that have put up barriers on goods essential to the global energy transition. 

“This is a legitimate question for partners to ask each other,” a French negotiator said of trade concerns. “But there are also other questions about which trade mechanisms are blocking or slowing down the transition. For example, wouldn’t a more open market for critical minerals be more effective in developing a transition away from fossil fuels?” 

Perhaps for that reason, China has been more careful than India, Saudi Arabia and African countries in pushing hard on trade in the negotiation rooms, said two European diplomats and one civil society observer, who were granted anonymity to discuss diplomatic issues.

“I don’t think that linking trade with climate is a good idea. That’s why we are encouraging trade issues [to] be addressed in trade channels,” said Liu, the Chinese envoy. “We are encouraging the EU to resolve their concerns and their problems with their respective partners bilaterally.”

But Liu did express concern that as a result of green trade measures, “the cost for cooperation for the energy transition might be driven up.” One European diplomat and one civil society observer also said Beijing had raised the EU’s tariffs on Chinese EVs at COP30.

The Brussels effect, climate edition

The EU maintains that CBAM is a climate measure, not a trade tool.

“In order to engage in this process of decarbonisation, you also have to make sure that an open market isn’t driving the deindustrialization of your own economy. You have to make sure that the terms of trade around clean tech and clean energy are free but also fair,” Jake Werksman, the EU’s chief negotiator, said last week at a press conference.

Heavy-polluting manufacturers based in the EU, such as steel and cement factories, have to pay around €80 for every ton of carbon they emit. That’s meant to encourage a switch to climate-friendly methods of production, but raises the risk that EU companies will be outcompeted by dirtier, cheaper products from elsewhere. 

To balance these competition concerns, the EU’s CBAM will gradually impose a fee on certain goods from countries where companies don’t face similar carbon costs, starting on Jan. 1 next year. 

But the EU also sees CBAM as a tool to press other countries to set up a carbon price. 

The bloc prides itself on being able to leverage its economic weight into global regulatory power, sometimes dubbed the “Brussels effect.” The levy is only one of several green measures targeting trading partners, with other policies seeking to stop imports of goods linked to deforestation or high methane emissions.

This effort has pushed other countries toward stepping up climate action. Turkey has cited CBAM as a key reason for introducing legislation to cut emissions, while a provision in the Mercosur trade agreement effectively prevents Argentina from exiting the Paris Agreement. 

Still, that approach doesn’t sit well with everyone. 

“We remain deeply concerned by the growing use of unilateral, manipulated trade measures which impose undue burdens … climate ambition must be built on partnership, not protectionism,” Mohammad Navid Safiullah, an official at Bangladesh’s climate ministry, told a press conference this week.

“There’s a lot of pressure on the EU because it added a lot of new [policies] affecting trade in past years. Deforestation, CBAM, all very harsh measures. We feel a conversation needs to be had,” said one Latin American negotiator, while cautioning that dispute resolution should remain a matter for the World Trade Organization, not the U.N. climate body. 

The EU says it’s willing to have that conversation — up to a point.

“We recognize this challenge exists, that this response to climate change … does produce friction in the trading system. And we need to address these frictions,” Werksman said. “What we aren’t prepared to create is some kind of proxy dispute settlement system.”

Trade tactics 

European negotiators also complain that while some countries have voiced legitimate concerns, some of those who have brought up CBAM at COP30 are doing so in bad faith. 

The Like-Minded Developing Countries, a negotiating bloc that includes India and China, as well as the Arab Group led by Saudi Arabia are using trade as a “tactical token” to gain leverage in the broader negotiations in Belém, said one European diplomat.

The European diplomat and the Latin American negotiator also said Saudi Arabia has sought to inject the trade dispute into unrelated negotiations to block progress. Riyadh often plays spoiler at climate talks to prevent any agreements that might affect its lucrative fossil fuel exports. 

“We do see some countries using this issue as a bit of a bargaining chip to seek concessions elsewhere in the negotiations. Some of the countries complaining about CBAM actually won’t face a significant economic impact” from the levy, said Ellie Belton, a senior advisor at think tank E3G who sat in on last week’s trade negotiations in Belém.

Still, she said, “there is more that the EU can do to demonstrate that it is open to testing new approaches and finding different ways to collaborate with developing countries.”

While the EU may be feeling the heat, Belton thinks the trade talks at COP are showing promise. COP30 host Brazil, which in past years has also taken issue with CBAM, has sought to play a more constructive role, setting up a discussion forum on trade and climate.

With more countries developing measures similar to the EU’s — the United Kingdom is introducing a CBAM in 2027 — such spaces are sorely needed, Belton said. 

“We need to start having real conversations about what that means in terms of practical outcomes when we have different CBAMs operating across different jurisdictions — the trade disruptions this will cause and the climate impact that could have in terms of the cost it places on developing countries that are exporting to those markets,” she said.

Some Europeans, at least, agree. 

“All countries that introduce a relevant carbon price will realize that sooner or later they will have to protect their industries from those that don’t have such price standards,” Jochen Flasbarth, Germany’s state secretary for the environment, told reporters last week. 

“I believe this conflict will ultimately only be resolved when we agree on international standards … a discussion that the Brazilians have started here,” he said. 

Zack Colman contributed reporting.