The EU has rolled out its Carbon Border Adjustment Mechanism (CBAM), under which EU businesses need to declare – and soon pay – for the emissions from the goods they import. Although direct costs will lie with the importer, exporters and exporting countries may feel its adverse effects. We explore what CBAM means for exporters across Latin America.
The EU has implemented a carbon tax mechanism as part of its efforts to reduce its greenhouse gas emissions by 55% by 2030 from 1990 levels and target emissions from imported goods. With this tax, the EU is imposing a carbon cost on emissions-intensive goods imported from outside of the EU based on their carbon content.
Steel, iron and aluminium imports are among the first commodities subject to the EU’s CBAM (explore our introductory briefing). These metals are fundamental for the EU’s industries and play a vital role in the energy transition, with most being sourced from mineral-rich countries. In 2023 alone, the EU imported over 37 million metric tonnes of steel from 137 countries.1
For now, importers must report the amount of iron, steel, or aluminium they bring into the EU, along with the associated embedded emissions, on a quarterly basis. Starting in 2026, however, a carbon levy will be imposed. With this levy, EU companies will have to purchase 'CBAM certificates' in response to the carbon content of these imported metals.
Whilst CBAM is in its transition phase, EU importers only report on the emissions from the production and energy input of ‘simple goods'. To capture this data, they will turn to their supply chain.
CBAM’s implications on exporters
Importers will bear the direct cost of this carbon levy. Nonetheless, exporters will likely face significant knock-on effects as iron, steel and aluminium exports risk becoming more expensive than their EU-produced counterparts. Such a reduction in price competitiveness could lead to lower demand, sales and revenues, especially in economies where the carbon intensity of iron, steel and aluminium production is higher than in the EU.
Latin America's exposure to CBAM
- Brazil: One of the biggest iron ore producing countries in the world, Brazil’s exports were valued at $30.6 billion in 2023.2 Of all iron and steel exports, ~12% are set for the EU market. These exports have an average carbon emissions intensity of 0.37 kgCO2e/$, exceeding the EU’s average (0.16 kgCO2e/$).3,4
- Chile: Iron and steel exports have a fairly low carbon intensity (0.13 kgCO2e/$), competitive with many countries within the EU. Chile’s exports would thereby face lower additional costs under CBAM, making them more competitive. As the 11th largest iron ore exporter, Chile currently directs most of its exports to Asia but has an opportunity to expand its exports to the EU market.5
- Mexico: Thanks to investments in clean energy and environmental regulations, Mexico stands to be one of least impacted countries to CBAM. In addition, only 2.5% of its aluminium exports go to the EU.6
- Venezuela: In 2023, Venezuela exported €82 million worth of iron and steel to the EU, accounting for roughly 50% of total iron and steel exports.7 With a carbon emissions intensity of 0.49 kgCO2e/$ of iron and steel exports and a much higher exports volume data, Venezuela is more vulnerable to CBAM than other countries in the region.8
CBAM represents both a challenge and an opportunity for Latin America's iron, steel and aluminium exporters. While the new carbon pricing framework requires investment in emissions tracking, low carbon technologies and sustainable practices, it also creates a clear pathway to align the region's industries with global climate goals. By adopting cleaner production methods, Latin American exporters can secure their competitiveness in the European market and position themselves as leaders in the transition to a low carbon global economy.
How can exporters respond to CBAM?
Although there are risks associated with CBAM, exporters of iron, steel, and aluminium can also find opportunities within it. CBAM is effectively creating the first global marketplace for low carbon metals, giving exporters a chance to differentiate themselves in the market. To turn CBAM into an opportunity for growth and sustainable economic development, consider to:
Measure and report emissions
Measure the carbon footprints of the iron, steel and aluminium products you produce and share these with your EU customers. This will not only meet customers’ demands for carbon data and build stronger customer relationships, but it will also provide valuable insights into where and how your business can reduce its emissions long-term to remain competitive.
Set reduction targets
After identifying your emission hotspots, set 1.5C-aligned reduction targets, aligned to best practices like the Science Based Targets initiative. Communicating targets could also help mitigate potential CBAM risk in the short term during the decarbonisation process by demonstrating your climate ambition to key customers.
Implement decarbonisation strategies
Detailed strategies and plans to reduce emissions can help you access sustainable finance to implement low carbon interventions, including renewable energy generation and alternative production processes to reduce emissions and energy use (e.g., electric arc furnaces).
Minimising emissions from iron, steel and aluminium production will be critical to remaining competitive among CBAM implementation. As an exporter, you should look at reducing your Scope 1 and 2 emissions but also aim to reduce the more challenging areas within your value chain, including the emissions tied to the mining and processing of these metals.
Engage value chain stakeholders
Decarbonising iron, steel and aluminium is no easy task and largely beyond the scope of any individual company. At the same time, the embedded carbon emissions that are subject to CBAM will likely be shared by multiple companies across your value chain. Supply chain engagement and collaboration are, therefore, critical. Engaging with both your suppliers and customers can help improve data collection and granularity, providing a clearer picture of where decarbonisation efforts are needed. Working together to reduce emissions along the value chain will also be important. For example, if a steel producer reduces their emissions, but the mining of iron ore remains carbon intensive, then the steel exported to the EU remains vulnerable to CBAM’s carbon levy.
How the Carbon Trust can help exporters remain competitive
While CBAM may initially pose significant risks to iron, steel and aluminium value chains, ambitious climate action can help companies and governments gain new customers, ensure continued international competitiveness and enable sustainable economic development. To turn CBAM from a setback into a springboard, we help you with:
1 International Trade Administration, 'Steel imports report: European Union', 2023.
2 World's Top Exports, ‘Iron ore exports by country’, 2023.
3, 6, 8 World Bank, ‘Relative CBAM Exposure Index’, 2025.
4 Economist Intelligence Unit, ‘CBAM will force change in carbon-intensive sectors’, 2023.
5 OEC, ‘Iron Ore Bilateral Trade Profile: Chile’, 2024.
7 European Commission, ‘European Union: Trade in goods with Venezuela’, 2024.
