On January 1, the European Union (EU) began full implementation of its Carbon Border Adjustment Mechanism, a landmark carbon tariff on imports of emissions-intensive goods aimed at aligning the cost of carbon embedded in foreign products with the price paid by EU manufacturers under the bloc’s Emissions Trading System (ETS).
Under the definitive phase of what is often called the EU’s carbon border tax, importers of steel, aluminium, cement, fertilizers, electricity and hydrogen must now buy and submit CBAM certificates reflecting the greenhouse gas (GHG) emissions embedded in those products.
The charges replace a transitional period from 2023 to 2025, during which firms were required only to report emissions without paying for them.
The policy is designed to curb so-called carbon leakage—the migration of production to countries with weaker climate rules—and protect EU industry from cheaper, higher-polluting imports.
The levy supports the bloc’s broader decarbonization agenda and ensures imported goods face a carbon cost similar to that borne by domestic producers.
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Critics, including China, India, Russia, and South Africa, have framed the mechanism as protectionist and warned it could escalate trade tensions, citing concerns about fairness and alignment with World Trade Organization rules.
Egypt has become the first country to seek an exemption from the CBAM, according to local media, as Cairo advances plans for a domestic carbon tax to shield local industries—particularly iron and steel, which could account for 74% of the measure’s financial burden.
EU officials and supporters argue the policy’s reach will grow over time, including broader sectors and that it is already encouraging other jurisdictions to consider carbon pricing.
The move is seen as a test case for export markets and a potential catalyst for global carbon pricing discussions.
Read more: UK Denied Temporary EU Carbon Tax Relief Until Carbon Market Link
