152 - Europe CBAM

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The Climate Mentor
June 16th, 2025 • Estimated Reading Time: 4 minutes

Europe’s climate weapon gets tuned up 🚀

We already talked about EU CBAM, a tax that punishes pollution while protecting local industries - you might have a look at it here, in the previous article.

But until last week, its complexity was rattling small importers. Now, a fresh regulatory shift spares 90% of small importers, while big emitters remain squarely in the spotlight.

Is this a compromise or a climate win? Let’s unpack what this means for trade, green finance, and investors worldwide.

Bar charts illustrating projected annual costs of the EU Carbon Border Adjustment Mechanism (CBAM) in US dollars by country and industry sector. Countries like Russia, China, and India face the highest projected costs, mostly due to iron and steel exports, aluminum, and fertilizer. Turkey, the UK, and others face lower but still significant costs, with sectors like cement and electricity also affected. The visualization highlights the diverse impact of CBAM on global trade and carbon-intensive industries.

Projected annual CBAM costs: the global impact of Europe’s carbon border tax

Winners, losers and a global ripple effect 

On May 22, 2025, the EU Parliament approved critical CBAM adjustments that will reshape global trade:

  • Small importers spared: Companies importing less than 50 tonnes annually of key goods like steel, cement, fertilizers, aluminum, and electricity are now exempt from CBAM reporting requirements — freeing up roughly 182,000 firms from red tape.

  • Heavyweights remain accountable: The top 10% of importers still account for over 99% of emissions — so CBAM’s climate impact remains robust.

  • Delayed carbon costs: Mandatory carbon permit purchases are postponed until 2027, giving industries time to adapt — but also raising concerns about potential loopholes.

  • ETS link still intact: CBAM’s connection to the EU’s Emissions Trading System ensures that carbon pricing remains consistent and transparent, with an eye on decarbonizing heavy industry.

For global exporters, especially in emerging markets, this means a complex dance: adapt supply chains, innovate low-carbon solutions, or risk being priced out of the EU market.

Illustration showing how the EU Carbon Border Adjustment Mechanism (CBAM) operates: Non-EU suppliers export carbon-intensive products (like steel and cement) to EU importers, who must purchase CBAM certificates at the border to equalize carbon costs with EU producers. Goods from Iceland, Liechtenstein, Norway, and Switzerland are exempt. The infographic highlights key steps of the carbon border tax process, trade flow, and emissions regulation under EU climate policy.

How the EU Carbon Border Adjustment Mechanism (CBAM) works: A visual guide to Europe’s climate policy

A smarter climate tool?

CBAM’s latest tweak reveals a fundamental truth: climate policy needs to be both effective and fair. For investors:

  • Expect supply chain reshuffles as exporters race to decarbonize.

  • Look for green tech opportunities that help industries meet carbon targets and comply with EU regulations.

  • Remember: the EU’s policy is just the beginning — the UK and others are already eyeing similar measures, which could spark a global wave of carbon pricing.

If you missed our deep dive on how CBAM works, check out our earlier post, “EU’s Carbon Border Adjustment Mechanism: A fancy name for a tariff on carbon intensive products”

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