Import fees based on emissions intensity are just around the corner. The EU Carbon Border Adjustment Mechanism (CBAM) is in effect and on January 31, importers were required to submit their first CBAM reports on the emissions associated with production of iron and steel, aluminum, cement, fertilizers, hydrogen, and electricity. Beginning in 2026, importers will be required to pay a fee on these emissions. The cross-border reporting of emissions data, soon to be followed by corresponding import fees, marks a significant transition for the global trading system.
In part due to the U.S. carbon advantage in manufacturing of CBAM-covered goods, our projections show that the U.S. will pay less in total CBAM fees than most major economies (see Figure 1).
To calculate total CBAM costs, we multiplied each country’s value of exports to the EU (in U.S. dollars) for each CBAM-covered product by a country- and sector-specific emissions intensity factor. We then applied a projected CBAM charge of $115 per ton of emissions. This estimate is based on 2034 forecasts for the price per ton of the EU’s Emissions Trading System, which will dictate the fully phased-in CBAM price.
Figure 1 expands on previous Council analysis to show that when we account for the carbon intensity of covered products and the value of U.S.-EU exports, the U.S. will experience a lighter CBAM burden than most major economies. The U.S. looks especially well-positioned in comparison to Russia, China, and India, who will pay the lion’s share of the CBAM dues.
Beyond total costs, an additional variable will play into how economies respond to these fees. Whether due to geographic proximity or trade relationships, an export economy’s degree of reliance on the EU market will dictate how exposed its industry is to CBAM price pressures (see Figure 2). Firms that export heavily to the EU can continue to compete for EU market share by decarbonizing their operations, or they can respond by diminishing their trade to the EU and seeking alternative export destinations for their carbon-intensive products.
This could open the door for U.S. firms to increase their exports to the EU. Because of the U.S. carbon advantage in CBAM-covered products, U.S. firms will pay less CBAM fee per product and have an opportunity to edge out foreign companies for increased EU market share.
Compared to other major economies, the U.S. is not dependent on the EU market for its exports in CBAM-covered product categories. The U.S. sends just 7% of all its CBAM-covered global exports to the EU and is not overly reliant on the EU market in any one sector. While firms from other countries will face pressure to either decarbonize or shift their exports elsewhere, American firms will have an opportunity to increase their EU market share.
Take iron and steel, for example, which make up over 60% of U.S. exports to the EU in CBAM-covered products. The U.S. sends less than 7% of its global iron and steel exports to the EU, with most U.S. iron and steel exports going to Canada and Mexico.
Together, Figures 1 and 2 begin to tell an important story. Either firms will have to decarbonize their operations for the betterment of the climate, or else risk losing market to cleaner products. The Council further unpacks this dynamic in subsequent analysis using a new metric, the “relative CBAM cost burden,” which accounts for both a country’s sector specific CBAM costs and its degree of dependency upon the EU market.