EU CBAM - indirect impacts to look out for

The EU CBAM has clear implications for importers, adding a carbon price to carbon-intensive products being brought into the EU from countries with lower or non-existent carbon pricing.  

But it’s not just the importers which will be impacted, other indirect impacts will affect companies who are not importing or exporting to the EU.  

Increased costs of goods 

The first impact might be a given but it’s still worth mentioning. The price of products is going to increase, and these price increases will be passed along the value chain to the customers.  

In 2023, Engie impact predicted that the EU CBAM may increase the price of impacted goods by 10% on average ​(Engie Impact, 2023)​.  

The graph below shows how Engie Impact expect the price increase to be distributed across different products imported into the EU. 

Figure 1. The increase in prices for imported products under the EU CBAM. These prices are calculated assuming the ruling has come into full effect which is predicted to occur ~2034 (Engie Impact, 2023).

The introduction of the CBAM charge is aligned with the phasing out of the EU Emissions Trading System’s (EU UTS’s) free allowances meaning EU goods may also see price increases which could be passed along the value chain. By 2034* there will no longer be free allowance and EU producers will have to pay outright for the carbon embedded in their products. 

Another avenue for potential cost increases comes from the new reporting burden that will be put onto exporters and non-European suppliers. These companies may need to set up processes for data collection, which will incur extra staff costs and potentially training costs as well ​(Carbon Trust, 2024)​. Importers will also face similar increases in compliance and reporting burdens that will incur staff costs ​(Carbon Chain, n.d.)​. 

Supply chain disruption 

Another indirect impact of the EU CBAM is the potential for supply chain disruption.  

This could be a result of a period of restructuring for exporters, where they prioritise their lowest emissions products for the EU market and save their higher emissions products for markets without carbon pricing ​(Wood Mackenzie, 2023)​. 

The need for exporters to reshuffle their portfolios may not be the only disruption, as companies will also need to become familiar with new reporting burdens and potentially investigate decarbonisation options.  

The supply chain may also become disrupted as importers in the EU consider changing suppliers if their current supplier is unable to reliably provide emissions data on its products. New supplier relationships are not formed overnight meaning delays and long lead times could easily follow while importers forge new connections ​(Carbon Trust, 2024)​.  

Carbon taxes in host countries 

Countries who export a significant proportion of goods or materials that are subject to the EU CBAM may be encouraged to implement or speed up the implementation of their own carbon pricing.  

While this would make things more expensive for domestic industry it would: 

a) help decarbonise their products making them more competitive, 

b) reduce the price importers have to pay as the domestic carbon pricing will be taken away from any CBAM credits and, 

c) the host country can collect the taxes generated through carbon pricing rather than allowing the EU to reap all the rewards ​(pwc, 2024)​. 

This means that companies outside of the EU may still find themselves faced with emissions reporting requirements and the need to start collecting emissions data if they haven’t done so already. 

Figure 2 Showing how the carbon price in the export country is subtracted from the CBAM certificate price. This encourages exporting countries to develop their own carbon pricing to capture the income for themselves ​(Wood Mackenzie, 2023)​. 

Carbon Border Adjustment Mechanism spreads 

While the EU was definitely the first to implement a carbon border adjustment mechanism, they will by no means be the last. There are a host of countries that have either announced their own CBAM, are looking into CBAMs or are developing their carbon pricing mechanisms in response.  

The UK has already committed to implementing its own CBAM in 2027, the US is continuing to develop its Foreign Pollution Fee Act 2025 and Taiwan has announced that its proposal for a carbon border adjustment mechanism is under development. Meanwhile, China is further expanding its Emissions Trading Scheme to cover more industries while Australia and Canada continue to discuss the development of their own carbon border adjustment mechanisms ​(pwc, 2024)​. 

This could mean that any exporters hoping to simply avoid the costs of decarbonisation by shifting their focus to regions outside the EU may find the strategy short sighted and limiting. It also means that companies outside the EU may soon find themselves having to report their emissions and pay a price for the carbon embedded in their products. 

So what does this all mean? 

The impact of the EU CBAM is two fold: increasing costs and lead times within supply chains and increasing the number of countries implementing domestic carbon prices. 

To try and prepare for this companies should consider: 

1. Mapping out their supply chains, understanding where materials are coming from and which materials, if any, may be subject to price increases or delays.  

2. Ensuring that the carbon emission sources in their own operations are mapped and that data collection processes have been implemented . Investigating if there are any ways to reduce emissions, setting goals and interim targets to meet these. If or when a carbon price is introduced in the areas in which the company has operations, not only will the company have the data ready but they will also have lower emissions to help negate the cost. 

   
   

At sustain:able, we help companies navigate this shifting landscape through practical emissions assessments, reporting readiness, and supply chain resilience planning, so you’re not just compliant, but competitive. 

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​​References 

​​Carbon Chain. (n.d.). How CBAM affects metals trade. Retrieved May 29, 2025, from Carbon Chain: https://www.carbonchain.com/cbam/eu-cbam-metals 

​Carbon Trust. (2024, November 25). CBAM: What it means for importers and exporters of steel, iron and aluminium. Retrieved May 29, 2025, from Carbon Trust: https://www.carbontrust.com/en-eu/news-and-insights/insights/cbam-what-it-means-for-importers-and-exporters-of-steel-iron-and-aluminium

​Engie Impact. (2023, April 7). What You Need To Know About CBAM, The EU’s New Carbon Tariff. Retrieved May 29, 2025, from Engie Impact: Engie Impact 

​pwc. (2024, February 27). The EU Carbon Border Adjustment Mechanism (CBAM): Implications for supply chains. Retrieved May 29, 2025, from pwc: https://www.pwc.com/gx/en/services/tax/esg-tax/cbam-supply-chain-imperatives.html

​Wood Mackenzie. (2023, September). Playing by new rules: How the CBAM will change the world. Retrieved May 29, 2025, from Wood Mackenzie: https://www.woodmac.com/horizons/how-the-cbam-will-change-the-world/

* Correction to the date of phase-out of free allowances (06/06/2025)