Workers will pass molten steel at Huaan’s steel factory in East Jiangsu Province, China on July 22, 2025.
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It has been less than three months since the European Union launched carbon collection, the world’s first major border tax on carbon-intensive products.
Future steps with the potential to completely change global trade come as part of the Bloc’s efforts to reduce greenhouse gas emissions from heavy industries and promote clean production processes around the world.
Starting from January 1st next year, the EU’s Carbon Border Regulation Mechanism (CBAM) will impose costs on goods such as iron, fertilizer, cement, aluminum and hydrogen imported from outside the 27-national block.
Under the terms of the policy, importers who bring these items to the EU must purchase CBAM certificates to cover related emissions. The costs of these certificates are expected to be the same as the market price of the EU Emissions Trading System (ETS).
Opposition of voice
Not everyone is excited about the EU’s upcoming carbon border tax. The US, China, India and Brazil are among the countries that raised concerns, with some threatening to take retaliatory measures, while others warn that policy may be more hampered than helping global climate efforts.
The European Commission, the EU’s executive branch, did not respond to a request for comment when contacted by CNBC.
Aerial view of the Belchatow Power Station, Europe’s largest coal-fired power plant near Belchatow, Poland, on August 22, 2025. It is Poland’s largest power plant with an installed capacity of 5,1 MW. The power plant is one of the candidates to be rebuilt as a future nuclear power plant.
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Nicolas Endress, founder and CEO of Crimease, a CBAM software solutions company, said the EU’s integrated carbon tax and tariff scheme will restructure global trade in ways that most companies still don’t know. Steel, cement, fertilizer and aluminum related sectors are first set up on the shooting line.
“It’s not a surprise,” Enders said countries without an emissions trading system (ETS) would be exposed to border taxes.
According to the EU, CBAM is designed to place a “fair price” on the carbon released during the production of emissions-intensive goods.
This tax is designed to prevent what is known as “carbon leaks.” This is when businesses move production overseas and move to countries where strict climate policies are not in place.
Climate leader test
The US warns that European climate regulations could threaten EU trade agreements with the White House.
US President Donald Trump signed a framework agreement with President Ursula von der Leyen of the European Commission in late July, establishing a 15% tariff cap on most EU goods since the beginning of August.
The rate was significantly lower than the 30% previously threatened by the US president, but exceeded the 10% baseline the EU wanted.
Speaking with the Financial Times last month, US Energy Secretary Chris Wright said without any major revisions, EU CBAM, among other green regulatory policies, would create “huge legal risks” for US companies selling fossil fuels to Europe.
Other countries exposed to EU CBAM have also criticised the plan. India is reportedly saying it will retaliate against the carbon border tax, saying that high-income countries historically responsible for the climate crisis should do more to reduce their greenhouse gas emissions.
Meanwhile, China, Brazil and Russia have raised concerns about the EU’s carbon border tax in both UN climate negotiations and the World Trade Organization.
European Commission President Ursula von der Leyen and NATO Executive Director Mark Latte will hold a joint press conference in Brussels, Belgium on September 30, 2025.
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EU’s Von Der Leyen became chairman of the European Commission in the 2019 manifesto, saying that he would introduce a carbon border tax “to avoid carbon leaks” and that he would “help EU companies compete on a level playing field.”
The policy was introduced as part of the Bloc’s efforts to reduce emissions by at least 55% by the end of the decade.
Alex Mengden, policy analyst at Tax Foundation Europe, said EU officials are usually trying to downplay the possibility of retaliatory measures from major economies when the final phase of CBAM begins.
“It may show that we can take so many climate leadership because we have real costs. And if we’re not in a global coalition, those costs will return to ourselves instead of our trading partners, which are essentially the goal,” Menden told CNBC over a video call.
“Now, of course, that might still be a success,” Menden said. “The success stories of policymakers devising CBAM policies are other countries that employ their own ETS systems,” he added.
It’s not just “European Experiments”
For some, the EU’s CBAM marks the first step in what is expected to become a global initiative to tackle the climate crisis.
“In the next few years, carbon pricing will not only be an experiment in Europe, but will also cover 80% of global trade,” Crimease’s Endress said.
“CBAM is doing this by being punished by the country without a robust system and rewarding people with ETS frameworks lined up in the EU,” he added. “A country that evolves with change and builds reliable carbon pricing will protect the industry, but countries that separate will see exporters face the outcomes in the end.”
