Europe’s Days of Carbon Colonialism are Numbered

The European Union is intent on implementing the world’s first tax on the carbon content of imported goods from January 1st 2026. The EU’s celebrated climate policy experiment, the Carbon Border Adjustment Mechanism (CBAM), will make its debut as the crowning jewel of its Green New Deal to make Europe “climate neutral by 2050”.

Brussels imagines itself as the arbiter of the world’s energy future, wielding carbon tariffs to discipline trading partners into compliance. Yet as 2026 approaches, it is increasingly clear that this grandiose project is destined to collapse under the weight of its own contradictions, geopolitical realities and economic irrelevance.

The Myth of the Climate Club

The EU’s conceit rests on an academic abstraction: Nobel laureate and economist William Nordhaus’s idea of a “climate club”. In his vision, nations form a coalition to punish free riders who benefit from emissions cuts without paying the costs. Trade sanctions, Nordhaus argued, would induce cooperation where voluntary agreements like the Kyoto Protocol and the Paris Agreement had failed. This was music to the ears of Brussels bureaucrats and Washington climate warriors. If only the global commons could be managed like a private golf club, with rules enforced at the border.

But clubs require willing, paying members. And here lies the problem: most of the world does not buy into Europe’s apocalyptic climate gospel. Developing countries from India to Brazil see the CBAM not as enlightened policy but as naked protectionism – a form of carbon colonialism that forces them to swallow the EU’s ideology or lose market access. At the Asian Development Bank annual meeting in Milan in May, India’s Finance Minister Nirmala Sitharaman said that Europe’s carbon taxes on high-emitting imports raise questions of “morality” and are a “repeat of colonialism”.

The BRICS group, at its July 2025 summit in Rio de Janeiro, issued a strong statement condemning CBAM. The bloc labelled it as “unilateral, punitive and discriminatory protectionism” that violates WTO rules and undermines the principle of common but differentiated responsibilities enshrined in the UN Framework Convention on Climate Change (FCCC). The statement expressed serious concern over what it described as “discriminatory protectionist measures under the pretext of environmental concerns”. This marked a significant escalation in BRICS’s criticism of Western environmental policies, framing them as economic barriers that disproportionately affect developing nations.

Officially, CBAM is about preventing ‘carbon leakage’. If European producers pay for carbon emissions under the EU Emissions Trading System, then foreign competitors should pay an equivalent tariff at the border. Otherwise, the logic goes, European firms will offshore production to less regulated jurisdictions, undermining climate goals. Or, conversely, foreign firms exporting to the EU will be more competitive than EU-based firms subject to their domestic carbon prices set by the EU Emission Trading System (ETS).

Yet the question is never asked: whose playing field is being levelled? For developing economies of the Global South, cheap coal, natural gas and oil are critical rungs in the energy ladder out of poverty. Western Europe, having already industrialised on fossil fuels, now seeks to kick that ladder away. This is not environmental justice; it is economic imperialism draped in green robes.

The Atlantic Rift

When the CBAM was first unveiled in 2021 under the EU’s grand Green New Deal package, Brussels could count on ideological alignment with the Biden White House. Both sides of the Atlantic sang from the same hymnbook: Net Zero by 2050 and the promise of green utopia.

But that was then. Today, Washington DC has undergone a dramatic about-face. On January 20th 2025 — on his first day back in the Oval Office — President Trump yanked the US from the Paris Agreement, declaring it the “scam” he’d always known it to be. Executive Order 14162, ‘Putting America First in International Environmental Agreements’, mandated US withdrawal from all UN climate commitments including Net Zero targets and contributions to ‘climate finance’. 

Ahead of his trip to Europe for a gas summit and meetings with EU officials last week, US Energy Secretary Chris Wright didn’t mince his words. He blasted the EU’s Net Zero targets as a “colossal train wreck”, warning the push for climate policies could weaken energy security and derail a US-EU trade deal. “Net Zero 2050 is just a colossal train wreck,” Wright told the Financial Times in an interview. “It’s just a monstrous human impoverishment programme, and of course, there is no way it is going to happen.”

The United States and the European Union jointly announced in late August the creation of the Framework Agreement on Reciprocal, Fair and Balanced Trade, which elaborates on a previous US-EU deal on tariffs and trade announced in late July. To the surprise of some observers, the framework contained a paragraph on the EU’s Carbon Border Adjustment Mechanism (CBAM). Among the 19 commitments included in the framework is a pledge that the EU will “work to provide additional flexibilities” in implementation of the CBAM, taking note of US concerns about its effect on small and medium enterprises (SMEs).

In this new geopolitical climate, it is inconceivable that Brussels would impose CBAM penalties on US exports. The EU already capitulated to Trump on energy imports and trade concessions worth hundreds of billions of dollars. Why would it provoke another tariff war over climate dogma? It won’t. CBAM will become yet another paper tiger, selectively enforced against weaker trading partners while the US gets a free pass.

For the United Kingdom, CBAM poses yet more hurdles to the Labour Government, committed as it is to ever closer economic and political relations with the EU. The EU and UK signed a ‘reset deal‘ at what critics call Prime Minister Starmer’s  “surrender summit” in May in London. The agreement calls for “establishing a link between carbon markets by way of a European Union-United Kingdom agreement linking the United Kingdom Emission Trading System (UK ETS) and the European Union Emission Trading System (EU ETS)”. Britain will struggle to link its carbon market to the EU’s in the few months remaining to January 2026, to avoid UK companies facing the bloc’s carbon border tariff and annual bills around £800 million pounds from next year.

Britain is likely to ask for exemption from the EU’s CBAM. If Brussels refuses, as is also likely, British exporters will be saddled with tariffs and compliance costs. Yet London is in no position to resist. Even as British households buckle under soaring energy prices, Westminster genuflects before the altar of climate orthodoxy, hoping for Brussels’s leniency. Referring to the signing of the EU-UK reset deal, ex-Prime Minister Boris Johnson called Keir Starmer “the manacled gimp of Brussels”.

Furthermore, the CBAM risks violating World Trade Organisation (WTO) rules on non-discrimination and national treatment. By rejoining the EU ETS, the UK will be embroiled in disputes with its trading partners including India and the US, both of which the UK recently concluded trade deals with.

Green Protectionism Meets Political Reality

Geopolitics has also upended the green dream. Europe’s decarbonisation crusade was already an exercise in self-harm; the Ukraine war turned it into outright disaster. Sanctions on Russia, followed by the sabotage of the Nord Stream gas pipeline, severed Europe’s access to cheap Russian gas. Germany, once marching proudly toward its Net Zero Valhalla, is instead being dragged into energy poverty by sheer realpolitik. Instead of abandoning fossil fuels voluntarily, it is being forced into energy scarcity by geopolitics and its need to buy US-sourced LNG at far higher prices. Against this backdrop, the idea that CBAM tariffs will ‘save the climate’ borders on the delusional.

Even within Europe, the policy has become a damp squib. Economic stagnation, welfare-state burdens, and a growing backlash against climate policies erode support for Brussels’s costly policy experiments. Populist parties across the continent, from Germany’s AfD and France’s National Rally to Britain’s Reform UK, openly mock the Net Zero obsession. Current Governments in these three countries, deeply unpopular, would be swept out if elections were held today. CBAM, as their flagship policy, may not survive their demise.

The EU’s CBAM is thus revealed for what it is: the last hurrah of a fading elite determined to impose its worldview on a recalcitrant Global South. It will not change the trajectory of global emissions. It will not persuade India, China or Brazil to abandon cheap energy. It will not even dent US exports, given Washington’s renewed climate scepticism. At best, it will add bureaucratic headaches and compliance costs for European firms, while alienating the very trading partners Europe needs for growth.

CBAM is not a bold step toward climate salvation. It is a symbol of Europe’s declining relevance, an impotent gesture by a continent that confuses moral posturing with power. As January 2026 approaches, one suspects the world will shrug at Brussels’s pretensions. Carbon colonialism, like its imperial predecessor, is destined for the dustbin of history.

Dr Tilak K. Doshi is the Daily Sceptic‘s Energy Editor. He is an economist, a member of the CO₂ Coalition and a former contributor to Forbes. Follow him on Substack and X.