On 14 July 2021, the European Commission proposed a carbon border adjustment mechanism (CBAM), a mechanism which would put a carbon levy on imports of certain emission intensive products from certain countries into the EU. Now, carbon credits also have a history which can be well traced back into the 1960s.
Today, in 2025, somehow, we are at the juncture where CBAM and carbon credits are being talked about in the same sentence.

Carbon credits, as market-based instruments, and CBAM, as a regulatory trade mechanism, are both pivotal in driving global decarbonisation efforts, and their implementation has resounding geopolitical implications. For starters - trade relations between the global north and the global south.

Cross-borders, transnational laws and with this comes the geo political implications of such a transnational regulatory activity that too when it involves goods of such high importance.
CBAM intensifies the spotlight on global trade inequalities. Now with the developing countries, this seems to be a double edged sword - Developing nations which rely on high-carbon exports have to meet CBAM standards, and transition to sustainable practices. However, there is a silver lining - Nations with emerging economies could potentially use carbon credit revenues to build greener industries, thus reducing dependence on fossil fuels. This could empower them to negotiate better terms in trade and climate forums, thus bettering their geopolitical standing.

Additionally, thanks to CBAM, countries may choose to tweak their export strategies, focusing on low carbon/carbon neutral goods; and carbon credits will be an integral part of this shift. What else - Developed countries might be under growing pressure to make green technologies and methods more affordable for others. This would help ensure that CBAM doesn’t become a way for economic neo-colonialism.

So, credible carbon credits (pardon me for saying this the umpteenth time), i.e, the ones which reduce/avoid emissions and support biodiversity, indigenous rights, and other environmental and social factors, can be pivotal for CBAM’s success.