On January 1, a border carbon tax on heavy industry products will come into force in the EU. It imposes financial obligations on importers due to their environmental impact – similar to those for local producers.
While this measure is intended to ensure fair competition for European industries, the launch of the Carbon Border Adjustment Mechanism (CBAM) could create tensions in trade relations with non-EU countries. This will only exacerbate the international trade crisis caused by Donald Trump’s new tariff policy.
Washington has tried to pressure the bloc to withdraw the law. During his October official visit, U.S. Energy Secretary Chris Wright said that applying the legislative initiative would create massive trade barriers between transatlantic partners. Earlier, the U.S. tripled duties on EU goods and raised tariffs on steel and aluminum by up to 50%.
China, India, Russia and South Africa also opposed the new measures as protectionist, some questioned their compliance with the World Trade Organization (WTO) norms.
According to local media, Egypt is so far the first country to ask the EU for an exemption from CBAM. Cairo is working on its own domestic carbon tax to protect local industry from the EU CBAM.
Note that the three-year transition phase for the carbon tax began in 2023 to give industry time to collect data on CO2 emissions and test methodologies.
From 2026, EU importers will have to buy and surrender CBAM certificates corresponding to the CO2 emissions of their products. The tariffs for these certificates are similar to those in the EU carbon market, at around €70 to €100 per ton of CO2.
Countries already in the carbon market will be able to offset their exports based on their domestic taxes.
According to the United Nations Framework Convention on Climate Change (UNFCCC), heavy industries such as steel and aluminum are a major source of CO₂ in the energy sector, accounting for up to 15% of all EU energy-related greenhouse gas emissions.
Jean-Marc Germain, CEO of Constellium, which represents the aluminum industry, said the CBAM will ultimately lead to higher aluminum costs in Europe.
“CBAM in its current form risks weakening the competitiveness of European aluminum without delivering meaningful emissions reductions,” Germain said.
The EU’s border tax on carbon dioxide emissions is meant to send a signal to countries outside the bloc, encouraging them to develop similar restrictions, using cleaner production methods.
