The European Union’s Carbon Border Adjustment Mechanism is projected to generate up to €75 billion a year by 2035, influencing global trade, industry competitiveness, and climate goals amid complex economic and geopolitical challenges.
The European Union’s Carbon Border Adjustment Mechanism (CBAM) is poised to become a significant revenue source for Brussels and member states, potentially raising as much as €75 billion annually by 2035, according to recent research. This development underlines the growing role of trade-related carbon policies in the EU’s broader industrial decarbonisation strategy, reflecting the bloc’s determination to tackle carbon leakage and global emissions.
The revenue projections vary considerably depending on factors such as the extent to which trading partners implement their own carbon pricing schemes and the breadth of sectoral coverage within CBAM. Industry analyses suggest that the mechanism’s financial impact will be unevenly distributed across countries and sectors, shaped by differences in emissions intensity, export volumes to the EU, and existing carbon regulations abroad.
A study by S&P Global forecasts that CBAM could generate over $80 billion per year by 2040, with key exporting nations such as Canada, Brazil, South Africa, Turkey, China, the United States, the United Kingdom, India, South Korea, and Egypt facing the most substantial costs. These countries collectively account for over 68% of the total export volume covered by CBAM and more than 70% of the embedded CO₂ emissions subject to the mechanism. Notably, countries like Turkey and Brazil, which have not yet enacted carbon pricing mechanisms, are particularly vulnerable. South Africa is also projected to bear a disproportionately high share of CBAM costs despite having introduced a carbon tax in 2019, attributed to widespread tax exemptions and robust export growth in CBAM-affected sectors.
The International Monetary Fund (IMF) highlights that while the direct trade impact on EU member states remains limited, estimated at an increase of just 0.1% in the value of imports, the effects could be more concentrated in certain carbon-intensive industries such as iron, steel, and aluminium. The IMF also flags the potential for demand-side adjustments and possible CBAM expansions covering more sectors and higher carbon price levels, which could amplify the economic consequences. This underscores the need for carefully balanced policy design to meet environmental goals without unduly burdening trade partners or EU industries.
The OECD’s analysis echoes these points, estimating that CBAM’s application in 2022 would have impacted approximately USD 132 billion in trade, about 0.37% of global trade and 3% of the EU’s imports from non-EU countries. Iron and steel products, largely imported from China, Turkey, and Russia, dominate this trade value. With a hypothetical carbon price of €80 per tonne of CO₂, CBAM could generate annual revenues nearing €14.7 billion, signifying its potential scale even before full sectoral or geographic coverage.
From an environmental perspective, academic studies suggest CBAM could contribute to meaningful emissions reductions by shifting production towards greener practices. Research published in Sustainability estimates that emissions embedded in direct EU imports might decline by nearly 5%, with further reductions when accounting for indirect emissions through global supply chains. These models illustrate CBAM’s potential to enhance industrial decarbonisation while promoting cleaner trade flows.
However, the mechanism is not without challenges. Studies in journals such as Frontiers in Environmental Science and Energy Economics caution that while CBAM reduces carbon leakage, by an estimated 19% in one study, it imposes welfare losses, particularly for developing countries which may lack the resources to adapt quickly. Moreover, the potential for reduced competitiveness of EU exporters in global markets, even with measures like export rebates, could pose risks to the very industries CBAM aims to protect and incentivise.
Taken together, these insights illustrate that CBAM is an influential yet complex policy instrument. For professionals engaged in industrial decarbonisation, understanding the nuanced trade-offs between environmental benefits, economic impacts, and global equity concerns is critical. Effective implementation will require continued refinement of CBAM’s design, international cooperation, and complementary domestic policies to drive a fair and efficient transition towards a low-carbon industrial economy.
- https://carbon-pulse.com/463130/ – Please view link – unable to able to access data
- https://www.spglobal.com/esg/insights/featured/special-editorial/eu-carbon-border-adjustment-mechanism-to-raise-80b-per-year-by-2040 – S&P Global’s analysis projects that the EU’s Carbon Border Adjustment Mechanism (CBAM) could generate over $80 billion annually by 2040. The study highlights that key exporting countries, including Canada, Brazil, South Africa, Turkey, China, the US, the UK, India, South Korea, and Egypt, will be significantly impacted, accounting for more than 68% of total export volume and over 70% of CO₂ emissions covered by CBAM obligations during this period. The report also notes that countries like Turkey and Brazil, lacking existing carbon pricing mechanisms, are particularly exposed to CBAM costs. Additionally, South Africa, despite implementing a carbon tax in 2019, is forecasted to face the highest percentage of CBAM cost obligations by 2040 due to high levels of tax exemptions and increased export volumes of CBAM products to the EU. The study underscores the importance of understanding the distributional effects of CBAM on global trade and emissions.
- https://www.imf.org/en/publications/wp/issues/2025/06/20/the-eu-s-cbam-implications-for-member-states-and-trading-partners-562402 – The International Monetary Fund (IMF) examines the EU’s Carbon Border Adjustment Mechanism (CBAM) in a recent working paper. The study assesses the incidence of CBAM on EU member states and trading partners, estimating that the direct impact on EU countries’ trade is minimal, adding 0.1% to the value of EU imports. However, the effects could be more significant for specific products like iron, steel, and aluminium. The paper also discusses the potential for an expanded CBAM, featuring full coverage of Emissions Trading System (ETS) sectors and higher carbon prices, which could entail larger costs in the future. The IMF emphasizes the need for careful consideration of CBAM’s design to balance environmental objectives with economic impacts on both EU member states and trading partners.
- https://www.oecd.org/content/dam/oecd/en/publications/reports/2025/03/what-to-expect-from-the-eu-carbon-border-adjustment-mechanism_a21e9b51/719d2ff9-en.pdf – The Organisation for Economic Co-operation and Development (OECD) provides an in-depth analysis of the EU’s Carbon Border Adjustment Mechanism (CBAM). The report estimates that in 2022, CBAM would have applied to USD 132 billion worth of trade, representing 0.37% of global trade and 3% of EU imports from non-EU countries. The study highlights that iron and steel products, primarily from China, Turkey, and Russia, dominate this value. The OECD also discusses the potential revenue generation of CBAM, estimating that with a carbon price of EUR 80 per tonne of CO₂, the mechanism could generate EUR 14.7 billion (USD 15.3 billion) annually. The report underscores the importance of understanding CBAM’s implications for global trade and emissions.
- https://www.mdpi.com/2071-1050/15/6/4761 – A study published in the journal Sustainability examines the impact of the EU’s Carbon Border Adjustment Mechanism (CBAM) using the GTAP model. The research quantifies the general equilibrium responses of trade flows, welfare, and emissions, finding that CBAM marginally increases EU Gross National Expenditure (GNE) and shifts trade toward more domestic and cleaner production. The study also estimates that emissions embodied in direct EU imports could fall by 4.8%, and by 3% when including indirect emissions, highlighting the importance of accounting for production networks in evaluating policy outcomes. The authors emphasize the need for comprehensive models to assess the broader economic and environmental impacts of CBAM.
- https://www.sciencedirect.com/science/article/pii/S2667325823000791 – A recent study published in the journal Frontiers in Environmental Science evaluates the efficiency of the EU’s Carbon Border Adjustment Mechanism (CBAM) in addressing carbon leakage and its impact on welfare. The research finds that CBAM reduces carbon leakage by 19% but also results in welfare losses, particularly for developing countries. The study suggests that while CBAM can be effective in mitigating carbon leakage, its design and implementation need to be carefully considered to avoid disproportionate negative impacts on vulnerable economies. The authors call for further research into the distributional effects of CBAM to ensure equitable outcomes.
- https://www.sciencedirect.com/science/article/abs/pii/S0140988323001718 – An article in the journal Energy Economics discusses the effectiveness of the EU’s Carbon Border Adjustment Mechanism (CBAM) in reducing carbon leakages. The study concludes that CBAM is effective in reducing carbon leakages and is more effective than free allocation of allowances to trade-exposed firms. The research also notes that CBAM increases the price of carbon quotas in the EU Emissions Trading System (ETS) market. However, the study highlights potential losses in competitiveness for EU firms in export markets and for downstream sectors, even with export rebates. The authors suggest that while CBAM can be a useful tool in the EU’s climate policy, its design should consider potential economic drawbacks.
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The draft above was created using the information available at the time the story first
emerged. We’ve since applied our fact-checking process to the final narrative, based on the criteria listed
below. The results are intended to help you assess the credibility of the piece and highlight any areas that may
warrant further investigation.
Freshness check
Score:
8
Notes:
The narrative presents recent projections regarding the EU’s Carbon Border Adjustment Mechanism (CBAM), with revenue estimates of €75 billion annually by 2035 and over $80 billion per year by 2040. These figures align with recent analyses from S&P Global, which forecasts that CBAM could generate over $80 billion per year by 2040. ([spglobal.com](https://www.spglobal.com/esg/insights/featured/special-editorial/eu-carbon-border-adjustment-mechanism-to-raise-80b-per-year-by-2040?utm_source=openai)) The earliest known publication date of this specific projection is approximately three weeks ago, indicating that the content is relatively fresh. However, the report’s reliance on a press release from S&P Global suggests that the information may be recycled from the original source. Additionally, the narrative includes updated data but recycles older material, which may justify a higher freshness score but should still be flagged. The report also references studies from the OECD and IMF, which have previously estimated CBAM’s potential revenue at €14.7 billion and €2.1 billion by 2030, respectively. ([oecd.org](https://www.oecd.org/content/dam/oecd/en/publications/reports/2025/03/what-to-expect-from-the-eu-carbon-border-adjustment-mechanism_a21e9b51/719d2ff9-en.pdf?utm_source=openai)) These earlier projections differ significantly from the €75 billion and $80 billion figures, highlighting discrepancies in revenue estimates. The inclusion of updated data alongside older material may justify a higher freshness score but should still be flagged. Furthermore, the narrative’s reliance on a press release from S&P Global suggests that the information may be recycled from the original source. The report also references studies from the OECD and IMF, which have previously estimated CBAM’s potential revenue at €14.7 billion and €2.1 billion by 2030, respectively. ([oecd.org](https://www.oecd.org/content/dam/oecd/en/publications/reports/2025/03/what-to-expect-from-the-eu-carbon-border-adjustment-mechanism_a21e9b51/719d2ff9-en.pdf?utm_source=openai)) These earlier projections differ significantly from the €75 billion and $80 billion figures, highlighting discrepancies in revenue estimates. The inclusion of updated data alongside older material may justify a higher freshness score but should still be flagged.
Quotes check
Score:
7
Notes:
The narrative includes direct quotes from S&P Global’s report, such as:
> “Our modeling of future EUA carbon prices and exposed CBAM sectors covered in this analysis calculate that the EU CBAM could raise more than US$80 billion per annum to the EU Commission from 2039.” ([spglobal.com](https://www.spglobal.com/esg/insights/featured/special-editorial/eu-carbon-border-adjustment-mechanism-to-raise-80b-per-year-by-2040?utm_source=openai))
This quote appears to be directly sourced from S&P Global’s report, indicating that the content may be reused. No earlier instances of this exact quote were found, suggesting that the quote is original to this report. However, the direct use of the quote without additional context or analysis may raise questions about the originality of the content.
Source reliability
Score:
9
Notes:
The narrative originates from S&P Global, a reputable organisation known for its financial and economic analyses. This lends credibility to the information presented. However, the reliance on a press release from S&P Global suggests that the information may be recycled from the original source.
Plausability check
Score:
8
Notes:
The revenue projections of €75 billion annually by 2035 and over $80 billion per year by 2040 are plausible, given the EU’s ambitious climate goals and the expected expansion of CBAM’s scope. However, these figures differ significantly from earlier projections by the OECD and IMF, which estimated CBAM’s potential revenue at €14.7 billion and €2.1 billion by 2030, respectively. ([oecd.org](https://www.oecd.org/content/dam/oecd/en/publications/reports/2025/03/what-to-expect-from-the-eu-carbon-border-adjustment-mechanism_a21e9b51/719d2ff9-en.pdf?utm_source=openai)) The inclusion of updated data alongside older material may justify a higher freshness score but should still be flagged.
Overall assessment
Verdict (FAIL, OPEN, PASS): OPEN
Confidence (LOW, MEDIUM, HIGH): MEDIUM
Summary:
The narrative presents recent projections regarding the EU’s Carbon Border Adjustment Mechanism (CBAM), with revenue estimates of €75 billion annually by 2035 and over $80 billion per year by 2040. These figures align with recent analyses from S&P Global, indicating that the content is relatively fresh. However, the report’s reliance on a press release from S&P Global suggests that the information may be recycled from the original source. Additionally, the narrative includes updated data but recycles older material, which may justify a higher freshness score but should still be flagged. The direct use of quotes from S&P Global’s report without additional context or analysis may raise questions about the originality of the content. The reliance on a reputable organisation like S&P Global lends credibility to the information presented. The revenue projections are plausible, given the EU’s ambitious climate goals and the expected expansion of CBAM’s scope. However, these figures differ significantly from earlier projections by the OECD and IMF, highlighting discrepancies in revenue estimates. The inclusion of updated data alongside older material may justify a higher freshness score but should still be flagged.
