How Europe’s new carbon tax on imported goods will change global trade

For people living in the European Union, the price of their next car, home renovation, and even local produce may soon reflect a climate policy that many have never even heard of. This new regulation, which comes fully into force on New Year’s Day, does not just target heavy industry-it affects everyday goods which now face an added carbon cost when they enter Europe. The carbon border adjustment mechanism (CBAM) puts a carbon price on many imported goods-meaning that EU-based importers will pay for the greenhouse gases emitted during the production of certain carbon-intensive materials. If goods come from countries with weaker climate rules, then the charge will be higher. To sell to the EU, producers will effectively need to show their goods aren’t too carbon-intensive. The goal is to prevent companies from relocating their production to places with looser regulations, ensuring fair competition between EU and non-EU companies, while incentivising global decarbonisation. After a trial phase , full payment obligations begin on January 1 2026, when importers will need to buy CBAM certificates to cover the embedded emissions in goods such as iron and steel, aluminium, cement, fertilisers, hydrogen and (eventually) electricity. Although it is an EU climate policy, CBAM looks set to be a game-changer for global trade. Countries that rely on EU exports may need to make costly investments in cleaner technologies and better emissions tracking, or risk losing market share. The UK government plans to introduce its own version of CBAM in 2027-although how this links to the EU’s is yet to be decided. A positive shift is already underway: more and more companies are now measuring and reporting their emissions accurately, responding to the growing demand for reliable carbon data. At the same time, an increasing number of countries are introducing their own carbon pricing systems to stay aligned with the EU and protect the competitiveness of their exports. Morocco is a prominent example: its 2025 finance law gradually introduces a carbon tax from January 2026. As Moroccan firms will already pay a carbon price domestically, their exports are likely to avoid additional CBAM charges at the EU border, helping them remain competitive.

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