Impact on Trading Partners and Exporters
A global ripple effect
CBAM's financial obligations fall on EU importers, but its economic consequences are felt most acutely by non-EU producers, particularly in developing and emerging economies whose industrial sectors are carbon-intensive. Understanding which countries and sectors are most exposed, and how they are responding, is critical for anyone assessing CBAM's real-world climate and trade impact.
Which Countries Are Most Exposed?
Exposure to CBAM is determined by two factors: the volume of CBAM-covered goods a country exports to the EU, and the carbon intensity of its production processes. Countries with large export volumes and carbon-intensive production face the greatest financial burden. The European Commission's 2021 Impact Assessment (SWD(2021) 643) identified Russia, Turkey, China, Ukraine, and India as among the most significantly affected economies given their export profiles at that time.
The World Bank's State and Trends of Carbon Pricing (2024) report provides a complementary lens: it shows that many of the world's most carbon-intensive industrial producers are in countries with no or low carbon pricing. This structural gap is precisely what CBAM is designed to address, but it also means that exporters in these countries face the most material cost increases when shipping to the EU.
| Country | Key CBAM-Exposed Sector(s) | Carbon Pricing Status (2024) | CBAM Exposure Level |
|---|---|---|---|
| Russia | Steel, aluminium, fertilisers | Voluntary carbon market only | High (pre-sanctions) |
| Turkey | Steel, aluminium, cement | ETS under development | High |
| China | Steel, aluminium, cement | National ETS (power sector mainly) | High (steel and aluminium) |
| India | Steel, aluminium, fertilisers | Carbon credit mechanism (PAT) | High |
| Ukraine | Steel | ETS under development | Moderate |
| South Korea | Steel, aluminium | K-ETS (deduction available) | Moderate (offset by K-ETS) |
Sector-Level Impacts
The magnitude of CBAM's impact varies considerably by sector, depending on the carbon intensity of production and the significance of EU export markets for that sector.
Steel and iron: This is the sector with the broadest geographic exposure, given that steel is a globally traded commodity and many major steel-producing countries export significant volumes to the EU. For coal-based blast furnace steelmakers, whose emission intensity can reach 2.0 to 2.5 tCO₂e per tonne of steel, a CBAM certificate price of €60-€70 per tonne could add €120 to €175 to the cost per tonne of steel, representing a material competitive disadvantage relative to low-emission electric arc furnace producers.
Aluminium: Aluminium smelters are highly electricity-intensive, so CBAM's indirect emissions scope (which covers electricity used in production) is particularly significant for this sector. Smelters powered by coal-fired electricity face much higher CBAM charges than those powered by hydroelectric energy, creating large within-country variation in exposure depending on local electricity grids.
Fertilisers: Nitrogen-based fertilisers are among the most process-emission-intensive CBAM goods. The Haber-Bosch process for ammonia production releases significant CO₂, and producers in countries without carbon pricing face the full CBAM certificate cost.
Analogy: Raising the floor, not the ceiling
CBAM does not prevent non-EU producers from selling to the EU. It raises the floor of the carbon cost that all producers must meet to access the EU market, regardless of where they are located. A low-carbon steel producer in Turkey faces minimal CBAM costs. A high-carbon producer in the same country faces significant costs. The competitive incentive is to decarbonise production, not to abandon the EU market.
Economic Magnitude: What the Numbers Say
The Commission's 2021 Impact Assessment estimated that CBAM would affect approximately €28 billion worth of annual imports across the covered sectors. At an EU ETS price of around €50 per tonne (the benchmark used in the assessment), total CBAM costs on these imports were estimated at roughly €1.3 to €2.1 billion per year, depending on actual emission intensities.
These figures have evolved as EU ETS prices rose above €90 per tonne in 2022-2023 before settling in the €50-€70 range. At higher carbon prices, the CBAM burden on carbon-intensive exporters is correspondingly larger, amplifying both the incentive to decarbonise and the potential trade friction.
EU Support for Developing Countries
Recognising that CBAM could impose disproportionate burdens on least developed countries (LDCs) and other vulnerable economies, the European Union has committed to providing technical and financial support to help affected countries adapt. The Commission published a dedicated guidance document on CBAM and developing countries in May 2024, outlining:
- Technical assistance to help countries establish emission monitoring systems compatible with CBAM reporting requirements
- Support for countries interested in developing or strengthening domestic carbon pricing mechanisms
- Linkage with EU development finance programmes (European Fund for Sustainable Development Plus, Global Gateway) that fund green industrial transition in partner countries
Example: A Moroccan cement exporter's CBAM exposure
Morocco exports cement clinker to several Southern European countries. Moroccan cement production relies primarily on coal-fired kilns, with average emission intensities around 0.82 tCO₂e per tonne of clinker. Morocco does not currently have a national ETS or carbon tax applicable to cement production.
At a CBAM certificate price of €65 per tonne CO₂e, each tonne of clinker exported to the EU carries an implicit CBAM cost of approximately €53. On a shipment of 100,000 tonnes, that represents a CBAM certificate obligation of €5.3 million. Morocco is currently developing a national carbon market, partly in response to this incentive structure.
Economists and policy analysts have modelled several possible responses by non-EU producers to CBAM. The desired response is decarbonisation: investing in cleaner production technologies (electric arc furnaces for steel, hydrogen-based ammonia for fertilisers, renewable energy for aluminium smelting) to reduce embedded emissions and lower the CBAM certificate cost. A second response is trade diversion: redirecting carbon-intensive exports away from the EU to markets without CBAM-equivalent measures. This would reduce EU emissions but could increase global emissions if those goods displace cleaner alternatives elsewhere. A third response is lobbying for domestic carbon pricing, enabling exporters to claim the CBAM deduction and remain competitive in the EU market. Evidence from the CBAM transitional period suggests that all three responses are occurring simultaneously, with the balance varying by country and sector.
Key Takeaways
- 1Countries most exposed to CBAM include Russia (pre-sanctions), Turkey, China, India, and Ukraine - all significant exporters of steel, aluminium, cement, or fertilisers to the EU with limited or no domestic carbon pricing
- 2The sector-level impact is largest for coal-based steelmakers (up to 2.5 tCO₂e/tonne) and coal-powered aluminium smelters, where CBAM costs can be material relative to commodity prices
- 3The Commission's 2021 Impact Assessment estimated CBAM would cover ~€28 billion in annual imports, with certificate costs of €1.3-€2.1 billion/year at €50/tonne ETS price
- 4The EU provides technical and financial support to developing countries to help them build emission monitoring capacity and domestic carbon pricing systems
- 5Non-EU producers can respond to CBAM by decarbonising, trade-diverting, or advocating for domestic carbon pricing that enables the CBAM deduction