Impact of the EU Carbon Border Adjustment Mechanism

The impact on Latin America and the Caribbean will be relatively minor. The most affected countries will be Brazil, Trinidad and Tobago and the Dominican Republic

By Luis Fierro Carrión (*)

Twitter: @luis_fierro_eco

The transition period of the Carbon Border Adjustment Mechanism (for greenhouse gas emissions) of the European Union (EU) began in October.

CBAM will initially be applied to a group of sectors: steel and iron, aluminum, cement, fertilizers, electricity and hydrogen. These sectors were selected taking into account their high level of carbon intensity and the volume of imports to the EU. The scope may be extended over time to other sectors covered by the EU Emissions Trading Scheme (ETS) and considered at risk of carbon leakage.

As of January 1, 2026, this financial adjustment will begin to be paid for imports of these products from countries outside the EU. The adjustment will be phased in as free emissions allowances in the ETS for these products are phased out over a period of 8 years. Although indirect emissions (such as from the generation of electricity used in production) will not be considered initially, once they are introduced, they will cause more significant effects (especially for fertilizers, cement and aluminum).