Carbon Border Adjustment Mechanism (CBAM), which is being implemented in a phase-wise manner in the European Union (EU), is becoming an object of trade disputes between the developing nations and the EU, as many emerging economies don’t have their domestic carbon markets and their exporters will now face stiff tariff-like penalties for selling their products in the European market. This paper discusses the CBAM mechanism and its impact on India. The paper also talks about the political economy of the issue and the responses of the respective governments to protect their own economies. Lastly, the paper discusses the larger ramifications of the CBAM felt across the globe and the future directions. (keywords: CBAM, Carbon Price, EU tariff.

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