Europe is getting climate policy all wrong. The EU’s Carbon Border Adjustment Mechanism (CBAM) fails to achieve climate progress and comes with a raft of awful side effects. For too long, European lawmakers have overlooked its potential to weaken the global economy and cause new socio-economic issues.
The EU’s CBAM gained attention as the need to combat climate change intensified. While CBAM aims to prevent carbon leakage and incentivise cleaner production, it risks widening the gap between producers and importers by disproportionately impacting economically weaker nations and trade-dependent economies.
These measures could hinder economic growth in key regions by increasing business costs and discouraging private investment. To be effective, climate strategies must balance ecological and social well-being and foster inclusive global cooperation. It is important to ensure emission reductions without exacerbating economic divides or slowing growth.
The new mechanism risks exacerbating the ‘two-tier global economy,’ which is harmful for both economic prosperity and climate goals. The transition to low-carbon products is not a simple policy adjustment but a major economic and technological leap which cannot be achieved without an effective governance framework. CBAM, in its current form, offers little in the way of assistance, creating new regulatory obstacles instead, leaving countries and their economies vulnerable to stunted growth and reduced export revenues.
Direct costs also remain a major problem with CBAM. For example, the UK is struggling with sluggish economic growth. Outside the EU, it has opted not to copy the EU’s CBAM, because its model would make the situation worse, not better. CBAM would place the UK on the wrong path for growth, reducing the pursuit of meaningful solutions for climate change and carbon leakage.
There is another solution besides the proposed CBAM. The alternative is the Climate & Freedom Accord (CFA), which contains a collection of policy proposals which would not limit economic growth but instead enhance it—something both developed and developing countries need. CFA is a new solution aimed at expanding freedom while removing barriers, costs, and governmental burdens on citizens. It represents a different, more forward-thinking approach compared to traditional climate policies.
Awareness of climate change remains strong. Conscious efforts to address it persist. However, with mechanisms like CBAM, significant challenges remain. Climate policies are failing, bringing side effects which compromise basic liberties and impose long-term costs on future generations. But we do not have to settle for the underwhelming failure of CBAM in our efforts to mitigate the consequences of climate change. There is always an alternative—one which unites freedom and climate action, rather than seeing a false trade-off between the two.
Recent global changes and the prioritisation of human security do not imply public awareness of climate change has diminished. According to polling conducted by the European Commission, EU citizens view climate change as among the continent’s most serious problems. It is an undeniably era-defining issue with consequences which affect both the environment and people. As long as there is strong political will and concern for global climate policy, hope for meaningful action remains.
The problems with the CBAM include discouraging private investment and increasing costs for business and the rise of complications with major trading partners such as India and African economies. The EU needs to save and maintain its partnerships with the major trading partners.
By hitting major trading partnerships with haphazard climate policy, the EU fails to comply with its own regulations and to deal with climate change. Instead, it causes discrepancies between economies and partners. Mechanisms which hit importers are not welcomed in the long run due to the high pressure from the high energy prices.
The ripple effects of CBAM will reach far beyond trade. With the increase in costs, the mechanism touches private investment in regions which are struggling to attract capital. This approach leads to a vicious cycle where countries are blocked from investing in cleaner technologies because they lack them in the first place.
To be truly productive, a climate strategy should balance economic justice with ecological goals. The fight against climate change is not a battle for one person or country, and it cannot be fought or won by leaving behind or harming the most vulnerable economies in the world, throwing them to the wolves of stagnant growth. A climate solution cannot be achieved alone; it must be accomplished together.
