The European Union’s new carbon border tax is now in force, reshaping how some of the world’s most polluting industrial goods enter the EU market. The system, which took effect on 1 January, applies to products such as steel, aluminium, cement, hydrogen and fertiliser.
Issued on: 02/01/2026 RFI
The Butachimie chemical in Chalempe, eastern France, in 2022. It's one of the industries under pressure to reduce greenhouse gases emissions. (AP Photo/Jean-Francois Badias) AP - Jean-Francois Badias
Importers of these goods must declare the carbon dioxide emissions embedded in their products. If those emissions exceed EU standards, they must pay a levy.
The policy, known as the Carbon Border Adjustment Mechanism (CBAM), is designed to ensure foreign producers face a carbon cost similar to that already paid by European companies under the EU’s internal emissions trading system.
Some trading partners argue the measure restricts trade and favours European manufacturers. The EU says the system encourages cleaner production because countries can avoid the levy by imposing an equivalent carbon price on their own industries.
"Pricing carbon is something that we need to pursue with as many as possible, as quickly as possible," the EU's climate commissioner, Wopke Hoekstra, said at the Cop30 UN climate negotiations in Brazil in November.
For more than 20 years, European producers in highly polluting industries have had to buy pollution permits if they fail to reduce their greenhouse gas emissions.
Until now, foreign producers were not subject to the same costs. European officials and economists have long described this gap as unfair competition that weakened EU industry.
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Climate ambitions
The EU says the aim of the border tax is to incentivise heavy industry to decarbonise and help combat global warming by correcting this imbalance.
Economist Christian Gollier said aligning the treatment of European and foreign producers was essential if the EU was to continue cutting emissions “without collapsing economically”.
The European Union has raised its climate ambitions, setting a target of a 90 percent reduction in emissions by 2040.
“To achieve these objectives, we will have to increase incentives for decarbonisation and therefore we will have to increase the price of carbon,” Gollier told RFI. “If we don’t correct this inequity in the market with these importers who wouldn’t pay this increasingly high price, it won’t be possible.”
Carbon pricing has already pushed European polluting industries to change how they produce goods, said Frédéric Ghersi, a climate policy specialist at France’s National Centre for Scientific Research (CNRS).
“Either foreign producers adapt their production processes and continue to sell as much in Europe, or European production will have to compensate for the reduced imports from these more polluting countries,” he said.
From the perspective of controlling global emissions, the measure “seems effective”, Ghersi added.
He said the overall impact could remain limited because the number of products covered by the border tax is relatively small.
Mixed global response
Aurora D'Aprile, who studied the global response to CBAM for the Swiss-based International Emissions Trading Association, told French news agency AFP there had been "a clear step change in the reaction" over the past 12 months.
“Several key trade partners of the European Union actively expanded their carbon-pricing schemes, for instance China, or launched emissions trading schemes after being in the making for many years, such as Turkey,” she told AFP.
Japan has cited the EU measure in its reasoning for advancing its own climate policies, said Nicolas Berghmans, a climate and energy researcher at the Institute for Sustainable Development and International Relations in Paris.
The United Kingdom and Canada are also considering similar mechanisms.
Importers of these goods must declare the carbon dioxide emissions embedded in their products. If those emissions exceed EU standards, they must pay a levy.
The policy, known as the Carbon Border Adjustment Mechanism (CBAM), is designed to ensure foreign producers face a carbon cost similar to that already paid by European companies under the EU’s internal emissions trading system.
Some trading partners argue the measure restricts trade and favours European manufacturers. The EU says the system encourages cleaner production because countries can avoid the levy by imposing an equivalent carbon price on their own industries.
"Pricing carbon is something that we need to pursue with as many as possible, as quickly as possible," the EU's climate commissioner, Wopke Hoekstra, said at the Cop30 UN climate negotiations in Brazil in November.
For more than 20 years, European producers in highly polluting industries have had to buy pollution permits if they fail to reduce their greenhouse gas emissions.
Until now, foreign producers were not subject to the same costs. European officials and economists have long described this gap as unfair competition that weakened EU industry.
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Climate ambitions
The EU says the aim of the border tax is to incentivise heavy industry to decarbonise and help combat global warming by correcting this imbalance.
Economist Christian Gollier said aligning the treatment of European and foreign producers was essential if the EU was to continue cutting emissions “without collapsing economically”.
The European Union has raised its climate ambitions, setting a target of a 90 percent reduction in emissions by 2040.
“To achieve these objectives, we will have to increase incentives for decarbonisation and therefore we will have to increase the price of carbon,” Gollier told RFI. “If we don’t correct this inequity in the market with these importers who wouldn’t pay this increasingly high price, it won’t be possible.”
Carbon pricing has already pushed European polluting industries to change how they produce goods, said Frédéric Ghersi, a climate policy specialist at France’s National Centre for Scientific Research (CNRS).
“Either foreign producers adapt their production processes and continue to sell as much in Europe, or European production will have to compensate for the reduced imports from these more polluting countries,” he said.
From the perspective of controlling global emissions, the measure “seems effective”, Ghersi added.
He said the overall impact could remain limited because the number of products covered by the border tax is relatively small.
Mixed global response
Aurora D'Aprile, who studied the global response to CBAM for the Swiss-based International Emissions Trading Association, told French news agency AFP there had been "a clear step change in the reaction" over the past 12 months.
“Several key trade partners of the European Union actively expanded their carbon-pricing schemes, for instance China, or launched emissions trading schemes after being in the making for many years, such as Turkey,” she told AFP.
Japan has cited the EU measure in its reasoning for advancing its own climate policies, said Nicolas Berghmans, a climate and energy researcher at the Institute for Sustainable Development and International Relations in Paris.
The United Kingdom and Canada are also considering similar mechanisms.
Diplomatic pushback
The CBAM – originally adopted by the EU in 2022 – was not the only influencing factor on other countries, says Marios Tokas, a trade lawyer at the Brussels-based law firm Cassidy Levy Kent.
But given the size of the European market it "sharpened" the urgency of the global policy response.
Russia has argued the policy breaches global trade rules and has taken its complaint to the World Trade Organisation. China and other emerging economies have criticised what they call a “unilateral trade measure” and pushed to place the issue on the agenda at the Cop30 climate talks in November.
But criticism at a global level "doesn't mean that the action on the compliance or adaptation side" isn't also being undertaken, said D'Aprile, pointing in particular to China.
Georg Zachmann, a specialist in European energy and climate policy at the Brussels-based think tank Bruegel, said the border tax could be described as “a political success for the EU”.
He told AFP that its long-term impact would depend on how many countries introduce their own carbon pricing schemes and how effective those policies prove to be.
D’Aprile cautioned against declaring victory before the EU finalises and implements the remaining “complex” steps of the system. Berghmans said differing carbon pricing schemes would pose “a big challenge” in the years ahead.
“We will have to support progress with a significant diplomatic effort,” he said.
Some European industrial groups have also raised concerns that foreign producers could under-report the emissions linked to their products, undermining the system’s effectiveness.
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