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

"Around the world, CBAM has faced strong criticism. India and China describe it as "green protectionism," arguing that it puts unfair pressure on developing economies. At the same time, the EU has not yet created dedicated funding to help exporters in lower-income countries adapt. Without this support, the mechanism may not achieve the desired results. What about consumers? Although CBAM is mainly aimed at industry, its ripple effects will reach consumers in the EU."

"Importers are unlikely to absorb the full additional cost, meaning prices are likely to rise-particularly for goods that rely heavily on steel, aluminium, or cement. This could mean Europe sees higher costs for cars, home appliances, electronics, building materials, and, indirectly, food production (through fertilizers). At the same time, CBAM may bring more transparency. Because importers must report the emissions embedded in their goods, consumers may eventually have clearer information about the climate impact of what they buy."

"The mechanism will also generate EU revenues from certificate sales. These are expected to support vulnerable households in many European countries, as well as funding clean technologies and improving energy efficiency. How the funds are used will be crucial to public acceptance of Europe's new carbon tax. Even before full implementation, CBAM is already reshaping supply chains and influencing government policies far be"

CBAM accelerates interest in renewable energy and greener industrial processes in many countries and creates opportunities to attract investment and build low-carbon manufacturing hubs. The mechanism is administratively complex for businesses, requiring systems to measure embedded emissions, collect supplier data, produce environmental product declarations, and secure renewable energy contracts. Several countries, including India and China, label it "green protectionism" and criticize its pressure on developing economies. The EU has not established dedicated funding to help lower-income exporters adapt. Consumers in the EU face likely price increases for goods with steel, aluminium or cement, alongside improved transparency and revenues earmarked for vulnerable households and clean technology.

Read at Ars Technica