The European carbon tax comes into effect tomorrow

Brussels, December 31, 2026 – The European Union will begin implementing the Carbon Border Adjustment Mechanism (CBAM), starting tomorrow, Thursday (January 1, 2026), which is expected to have a limited impact on international trade, especially since it currently only includes less than 5% of the Union’s imports of basic products such as steel, aluminium, cement, and fertilizers. However, its long-term repercussions may be broader with the expansion of its scope starting in 2028.

According to estimates by the Organization for Economic Cooperation and Development, the mechanism currently targets only 303 products, representing about 3% of total European Union imports, while the International Monetary Fund estimated that the percentage would reach 4.5% based on trade data for 2021.

Experts expect that this tax will lead to a partial redirection of European imports in favor of less carbon-intensive countries, such as Canada, Mexico, Chile and Turkey.

Reports from the World Bank warned that developing countries that rely heavily on the European market, such as Mozambique and Egypt, in addition to India, Indonesia, Tunisia and South Africa, may be negatively affected by the decline in the competitiveness of their exports.

The World Trade Organization believes that emissions-intensive products imported into the European Union will become less competitive, which may give products manufactured within the Union a greater market share, and encourage the partial relocation of some industrial production activities in Europe.

The organization also expects that this trend will lead to a shortening of global value chains as a result of the high cost of imports.

The greatest concern is focused on industries located in the later stages of production chains, which rely on taxable raw materials, as they may face an increase in costs and a loss of competitiveness, especially with the application of the carbon adjustment mechanism being coupled with reform of the emission quota trading system and gradually reducing compensation mechanisms until 2036.

Representatives of European industrial sectors warn that the tax may have inflationary effects if supply chains do not adapt quickly, at a time when professional organizations indicate that some European importers are not ready to fully comply with the mechanism when it enters the stage of full implementation in 2026, which may lead to the disruption of shipments in European ports.

The carbon adjustment mechanism is still the subject of criticism from a number of countries in the Global South, which consider it a disguised protectionist measure, despite the European Union’s denial of this. Russia has submitted a complaint in this regard to the World Trade Organization, while the organization warns that this mechanism may contribute to increasing trade tensions globally.

The measure also raises reservations in the United States, as US President Donald Trump expressed clear opposition to it, which prompted the European Union to consider the possibility of granting some flexibility to the American companies concerned with the full implementation of the mechanism starting tomorrow.

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