VidBodh AcademyThe art and science of civil services preparation
Student login

Environment › Climate negotiations and finance

Climate finance, carbon markets and carbon pricing

Climate money and the price of carbon: the funds and goals for climate finance, green bonds and what may be counted green, carbon markets, and border taxes on carbon. Prelims has asked about carbon markets under Article 6 of the Paris Agreement and about a bond that funds both environmental and social projects.

UPSC has asked

  • Prelims 2025: Article 6 of the Paris Agreement and carbon markets
  • Prelims 2023: carbon markets as a tool against climate change

Showing 1 of 3 subjects, those that changed from 16 to 31 August 2026.Show all

Carbon Border Adjustment Mechanism

Copy link to Carbon Border Adjustment Mechanism

Prelims and Mains

The European Union's Carbon Border Adjustment Mechanism (CBAM) entered its definitive phase in January 2026, and it is not the climate logic of it that developing exporters object to.

  • It covers iron and steel, aluminium, cement, fertilisers, electricity and hydrogen.
  • Iron and steel are about 90 per cent of India's exports to the European Union that the mechanism covers.
  • The objection is to who wrote the rule and who pays, not to whether carbon should carry a price at all.
The case for
  • A carbon price inside the bloc raises costs there, and cheaper imports would otherwise undercut it
  • The charge is meant to prevent carbon leakage
The case against
  • It is set by one bloc rather than agreed under the United Nations climate process
  • It cuts across common but differentiated responsibilities
  • Developing exporters, India among them, call it a trade barrier
From The Hindu, 19 August 2026, and the BRICS Environment Ministers' outcome documents as released by PIB, 17 August 2026

What changed

  1. 19 Aug 2026

    The Hindu, 19 Aug 2026: BRICS environment ministers oppose EU carbon border tax (opens in a new tab)

  2. 2 Jul 2026Updatealso in news

    • The European Union is redesigning its carbon market to match its 2040 goal and may hand more free permits to heavy industry. Carbon prices are about €80 a tonne against under €10 in the 2010s. A weaker system changes the calculus of the carbon border charge that Indian exporters face.
    • The European Union's Emissions Trading System is the world's largest carbon market, and sets the carbon price that the European carbon border charge applies to imports.

    The Hindu, 2 Jul 2026: 'EU carbon overhaul could benefit polluters' (opens in a new tab)