Assessing fairness of CarbOn taxes on developing countries

Amid increasingly ineffective climate conferences, carbon taxes such as the EU’s Carbon Border Adjustment Mechanism (CBAM) place a disproportionate burden on developing countries. COP29 in 2024 concluded with a commitment of USD 300 billion in climate finance for developing nations—far short of the USD 1.3 trillion demanded. Simultaneously, developments in the United States, including Donald Trump’s withdrawal from the Paris Agreement and the imposition of protectionist trade measures, have further weakened global climate cooperation. Instead of assuming greater responsibility in climate financing, developed countries are exerting pressure on developing economies through instruments such as carbon border taxes.
Carbon taxes favour countries that emit relatively less carbon during manufacturing and, indirectly, those with access to cleaner energy sources. At first glance, such measures appear pro-climate; in practice, however, they function more as trade barriers against developing countries. EU importers are left with two choices: either pass the carbon tax burden onto exporters—thereby reducing their surplus—or shift demand to producers operating in cleaner-energy jurisdictions. In both cases, countries with greater financial and technological capacity stand to benefit.

Developed countries such as the US and the UK possess significantly greater resources and advanced technology to establish green infrastructure and reduce emissions. In contrast, developing countries must allocate substantial portions of their budgets to healthcare, education, poverty alleviation, and basic necessities. Having largely addressed these foundational sectors, developed nations are better positioned to divert resources towards clean energy transitions. Imposing uniform carbon taxes on both developed and developing countries therefore entrenches inequality and risks widening the existing economic gap.

Moreover, developed countries account for the bulk of historical emissions, having industrialised during periods when colonised regions were largely excluded from technological progress. They consequently bear a greater responsibility to shoulder the climate burden rather than shifting it onto developing countries. With superior financial capacity, their contribution to addressing climate change must be proportionally larger.
In this context, a uniform carbon tax regime is fundamentally unfair. The solution lies neither in exempting developing countries from emissions constraints nor in overburdening them with abrupt decarbonisation demands. Instead, developed countries should actively support clean energy transitions in developing economies—potentially through cooperative arrangements such as technology transfers or agreements that exchange clean energy infrastructure for access to critical resources.