economy
December 21, 2025
How Europe’s new carbon tax on imported goods will change global trade
For people living in the European Union, the price of their next car, home renovation, and even local produce may soon reflect a climate policy that many have never even heard of. This new regulation, which comes fully into force on New Year’s Day, does not just target heavy industry—it affects everyday goods which now face an added carbon cost when they enter Europe.
TL;DR
- The EU's Carbon Border Adjustment Mechanism (CBAM) will impose a carbon price on many imported goods starting January 1, 2026.
- CBAM aims to prevent companies from relocating production to countries with weaker climate regulations and to ensure fair competition.
- Importers will need to buy CBAM certificates to cover greenhouse gas emissions from the production of goods like iron, steel, aluminum, cement, and fertilizers.
- The policy is expected to increase prices for EU consumers on goods such as cars and building materials.
- CBAM is driving interest in cleaner technologies and greener industrial processes globally, with countries like Morocco introducing their own carbon pricing.
- Critics, including India and China, label CBAM as 'green protectionism' and note the EU has not yet provided dedicated funding for lower-income countries to adapt.
- CBAM revenues are expected to support vulnerable households, clean technologies, and energy efficiency within the EU.
- The mechanism is already reshaping supply chains and influencing government policies beyond Europe's borders.
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