The Carbon Border Adjustment Mechanism (CBAM) introduced by the European Union (EU) is one of the most ambitious global carbon regulation initiatives with its main goal being to prevent ‘carbon leakage’. The CBAM transition phase, running from 2023 to 2026, is an essential stage that allows importers to familiarize themselves with the new requirements and prepare for the full reporting that will become mandatory from 2026. As the definitive regime of the EU’s CBAM approaches, governments are beginning to respond. For example, the UK is advancing its own carbon border adjustment, while several countries in the Global South, together with China, have voiced concerns about the potential impacts of CBAM on trade and climate multilateralism. We broached this subject with several international climate experts to seek their opinions on the challenges and opportunities of the EU’s CBAM on global trade and climate cooperation. Check out their opinions below.
Key Takeaways:
- Carbon leakage refers to a situation when stringent climate policies in one state or region lead to the relocation of emissions-intensive production to states or regions with weaker environmental regulations.
- CBAM is a charging mechanism that will become applicable from 2026 for products imported into the EU, designed to reduce the risk of carbon leakage.
- According to experts, CBAM presents a transformative opportunity to accelerate global decarbonization by incentivizing carbon pricing, cleaner production, and climate cooperation.
- However, CBAM could disproportionately affect countries with limited capacity to decarbonize, potentially undermining development efforts by increasing export costs and reducing competitiveness.
- With the appropriate governance, CBAM can shift from being a source of tension to become a catalyst for global climate cooperation and ambition.
- The challenge for the EU is to keep its foot on the pedal to achieve this commitment, according to experts.
DevelopmentAid: What challenges and opportunities do the EU’s Carbon Border Adjustment Mechanism create for global trade and climate cooperation, and how might these affect international development efforts?
“The EU’s CBAM, set to launch fully from 2026, introduces both challenges and opportunities for global trade and climate cooperation. Designed to prevent carbon leakage by imposing carbon costs on imports from countries without equivalent climate policies, CBAM supports the EU’s climate goals. However, the policy has raised concerns among exporting countries who see it as a unilateral measure penalizing their industries. For global trade, CBAM might disproportionately affect countries with limited capacity to decarbonize, potentially undermining development efforts by increasing export costs and reducing competitiveness. Yet, CBAM also presents opportunities. We can already see that CBAM incentivizes the broader adoption of carbon pricing and cleaner technologies globally, fostering convergence in climate ambition. If accompanied by support mechanisms such as climate finance, CBAM could strengthen climate cooperation and accelerate global decarburization. Ultimately, the impacts of the CBAMs currently implemented in the EU and in the UK will depend on whether they are paired with international efforts to support low-income countries in their green transitions. What is clear already is that countries and companies need to be prepared and understand that emission intensity of production will increasingly be an important determinant of global competitiveness.”
“The EU’s CBAM, set for full implementation in 2026, aims to prevent carbon leakage by leveling the playing field between EU producers and imports from jurisdictions with weaker climate policies. While it incentivizes global decarbonization, CBAM introduces complex challenges for global trade and climate cooperation. Emerging economies fear it could function as a de facto trade barrier, undermining the principles of climate justice and the Common But Differentiated Responsibilities (CBDR) enshrined in the Paris Agreement. For countries in the Global South, CBAM risks raising export costs and diverting resources from domestic development and adaptation priorities. However, it also presents an opportunity: by aligning with EU standards and accessing climate finance and technology transfer, these nations can accelerate their own low-carbon transitions. In summary, the mechanism’s success will depend on ensuring transparency, fairness, and support for capacity building in lower-income countries. Without inclusive dialogue and international cooperation, CBAM could exacerbate tensions in the global climate regime. With the right governance, however, it could catalyze a more harmonized, ambitious global response to climate change.”
See also: Global reactions to the EU’s carbon border adjustment
“The Carbon Border Adjustment Mechanism is a huge opportunity for our planet and future generations. Our earth is literally on fire, and we cannot trash our planet by continuing to extract oil and gas for energy and use its atmosphere as an open sewer. We can no longer burn rainforests and drain wetlands to grow commodities such as palm oil, coffee, cocoa, soya, and beef, at the expense of the earth’s biological fabric. The challenge for the EU is to keep its foot on the pedal to achieve this commitment. There will be steaming pressure from grumpy old foreign powers to try to water this down, postpone or cancel this humanity-saving regulation. Actually, this should only be the start of more mechanisms adjusted to products made by children and oppressed ethnic groups, cheap, dirty products which become instant trash after purchase, and many more. The EU at the moment is the only bloc pursuing a clean and fair economy and is the only hope to transform global trade. Doing business with the EU comes with strings attached and forces the bloc’s business partners to show their true climate commitment, but those willing to change should be financially and technically supported by the EU.”
“As Europe implements its revolutionary CBAM, active since October 2023 and fully operational by 2026, MERCOSUR discovers an unprecedented opportunity that will redefine regional trade. In 2024, Argentina channeled more than US$8.5 billion in exports toward European markets, while Brazil sent US$21 billion in agricultural products to the EU and Uruguay concentrated 14% of its US$12.8 billion in exports to European Union members. What makes this juncture strategic lies in a revealing energy paradox. While the EU barely reaches 39% of renewable energy in its matrix, Uruguay and Paraguay operate with practically 100% clean matrices, and Brazil maintains an impressive 85% green composition. This energy supremacy transforms the South American bloc into the preferred destination for emerging power shoring, the business strategy that seeks to locate production where clean and economical energy abounds. Bolivia, as a less developed country in terms of carbon strategy genuinely oriented toward reducing greenhouse effects and incorporated as a full member in 2023, contributes a crucial additional dimension but also represents a burden for other MERCOSUR countries regarding CBAM compliance. Despite its gas production declining from 16.969 to 13.390 million cubic meters between 2021-2023, its US$10.9 billion in 2023 exports include vital minerals for the global energy transition. Fintech companies such as AndesCapital Ecofintech (a small but ambitious Bolivian-European fintech specialized in financial carbon strategy) must be considered as a strategic link to generate strategic compatibility. The fresh MERCOSUR-EU agreement crystallizes this window of opportunity: 1.8 billion euros allocated to regional decarbonization, the elimination of tariffs for Brazilian and Argentine strategic minerals, and a regulatory framework that favors South American green production. CBAM can cease being an obstacle to become a catalyst: while Europe penalizes carbon-intensive imports, MERCOSUR positions itself as the preferred supplier of sustainable products, establishing a new hegemony in international green trade. It’ll have to respect CBAM requirements.”
“Several countries, including some from the Global South, have recently strengthened their climate change mitigation policies or are actively considering doing so. This will contribute to reaching their climate ambition and adapting to the implementation of border carbon adjustments (BCAs) globally, such as the EU and UK CBAMs. Some of those countries are also considering implementing their own BCA to tackle carbon leakage resulting from their more stringent climate policies. The impact on international development efforts resulting from BCAs is complex. Their implementation presents challenges, especially for countries that lack capacity in the monitoring, reporting and verification (MRV) of greenhouse gas (GHG) emissions. The multiplication of BCAs also creates a risk of increasing compliance costs for firms if the GHG accounting methodologies significantly differ. Finally, while BCAs may initially impose additional costs on high-emitting goods, they also create incentives to accelerate the global transition to low-carbon industrial processes. The key to minimize negative trade outcomes and maximize mitigation results lies both in the global harmonization of GHG accounting methodologies and in ensuring adequate technical and financial support for trading partners to build the necessary MRV systems and pursue their industry decarburization efforts. International fora such as the OECD’s Inclusive Forum on Carbon Mitigation Approaches and the Climate Club offer platforms for developing interoperable and harmonized carbon intensity metrics, facilitating alignment of sectoral strategies, sharing best practices, boosting international partnerships, and addressing concerns raised about carbon leakage and BCAs. Far from hindering international development efforts, the implementation of BCAs opens a sea of opportunities for enhanced climate cooperation and positive development outcomes.”
See also: The potential of debt-for-nature swaps in the developing countries | Experts’ Opinions
As the definitive regime of the EU’s Carbon Border Adjustment Mechanism (CBAM) approaches in 2026, new employment opportunities – particularly in the environment and climate sectors – are expected to emerge. To stay ahead of the competition, experts should consider strategic ways to access these roles. With DevelopmentAid’s Individual Professional Membership, professionals can instantly access over 4,000 job openings in the international development sector and filter these by location, contract type, sector, years of experience, and more. In the environmental sector alone, there are currently over 400 openings. Moreover, candidates can explore tenders and grants for individuals, contact organizations or funding agencies directly, and pave their own ‘green way’ into the field.
