EU’s CBAM takes full effect in 2025, extending carbon tax obligations to non-EU imports.
U.S. considers Clean Competition Act and FPFA, while some states already implement ETS.
39 countries impose carbon taxes, while 36 nations operate ETS programs.
China, India, and Brazil oppose CBAM, arguing it is a trade barrier, and will push for discussion at COP29.
Opinion
Carbon taxation is evolving from a domestic climate policy tool into a major force reshaping international trade. Developed nations are pushing carbon tariffs to protect domestic industries and advance climate goals, while emerging markets view them as protectionist barriers. The impact of carbon tax policies on global trade structures will likely intensify in the coming years.
Core Sell Point
As carbon tax costs become a reality, companies must invest in emissions reduction and supply chain efficiency to navigate rising production costs and increasing trade barriers.
Carbon taxes are emerging as a key variable in global trade dynamics. The European Union (EU) plans to fully implement the Carbon Border Adjustment Mechanism (CBAM) in 2025, ending its transition phase by the end of this year. In response, the United States is considering the Clean Competition Act and the Foreign Pollution Fee Act (FPFA), while several states have already adopted Emissions Trading Systems (ETS). According to the World Bank, 39 countries currently impose carbon taxes, while 36 nations operate ETS programs.
Carbon tariffs function as de facto import duties, triggering trade tensions. CBAM, in particular, places the carbon tax burden on importers, raising concerns about reduced industrial competitiveness. Emerging economies such as China, India, and Brazil have labeled CBAM a protectionist measure and proposed formal discussions at COP29. India, for instance, argues that CBAM could add a 20–35% cost burden on its steel and aluminum sectors, leading to strong opposition.
For corporations, carbon intensity management and supply chain optimization are becoming business imperatives. Under CBAM, when product-level emissions data is insufficient, the average emission factor of the country of origin is applied. Similarly, the FPFA may impose additional costs if the reliability of emissions data is questionable. As a result, carbon reduction is now a competitive necessity, and companies must optimize supply chains to mitigate rising carbon costs.
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