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 will feel its adverse effects. We explore what CBAM means for exporters from mineral-rich countries across Africa, Asia and South 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, revenues and possibly even a reduction in jobs, especially in emerging economies where the carbon intensity of iron, steel and aluminium production is often higher than in the EU.
According to the African Climate Foundation, for example, CBAM could reduce exports by 5.7%, resulting in a 0.91% loss in the continent’s GDP. This will be particularly felt by sectors that export the metals that fall under CBAM: aluminium exports across Africa could decrease by 14% while iron and steel could decrease by 8.2%.2
Countries’ exposure to CBAM risks
Looking beyond exports volume data, some countries’ rely more on the exports of these metals to the EU than others, including:
- South Africa: A tenth of South Africa’s exports to the EU will be impacted by CBAM, equivalent to roughly 0.8% of the country’s GDP.3 Iron, steel and aluminium sectors are particularly vulnerable with ~16% of South Africa’s iron and steel exports and ~25% of aluminium exports at risk. The country’s reliance on coal power also means that the carbon intensity of these metals (0.91 kgCO2e/$ for iron and steel and 0.32 kgCO2e/$ for aluminium) far exceeds the carbon intensity of the EU (0.16 kgCO2e/$ and 0.07 kgCO2e/$ respectively) and other metal-exporting countries.4,5
- Mozambique: With nearly 97% of all aluminium exports destined for the EU market and a much larger carbon emissions intensity (0.68 kgCO2e/$ versus the EU average of 0.07 kgCO2e/$), aluminium exports are particularly vulnerable.6
- Brazil: One of the biggest iron ore producing countries in the world, Brazil’s exports were valued at $30.6 billion in 2023.7 Of all iron and steel exports, ~12% are set for the EU market with a carbon emissions intensity of 0.37 kgCO2e/$, making Brazil more exposed than other Latin American countries.8
- 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.9 With a carbon emissions intensity of 0.49 kgCO2e/$ of iron and steel export, Venezuela is also highly vulnerable to CBAM.10
- India: Due to its reliance on coal power, India’s carbon emission intensity of its iron and steel (2 kgCO2e/$) is significantly higher than the EU average, which is one of the lowest in the world (0.16 kgCO2e/$), making the imports from India much more costly under CBAM. As 23% of total iron and steel exports goes to the EU, India faces significant risks from the EU‘s carbon levy.11,12
CBAM requires South Africa’s iron, steel and aluminium sectors to innovate and respond to what is, essentially, the world’s first marketplace for low carbon metals. By decarbonising their value chains, South Africa can gain a competitive advantage, drive sustainable economic development and ultimately support the country’s just transition.
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 this 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 African Climate Foundation and The London School of Economics and Political Science, ‘Implications for Africa of a Carbon Border Adjustment Mechanism in the EU’, 2023.
3 TIPS, 'South Africa's iron, steel, and aluminium industries: Readiness to respond to CBAM', 2024.
4, 12 Economist Intelligence Unit, ‘CBAM will force change in carbon-intensive sectors’, 2023.
5, 6, 8, 10, 11 World Bank, ‘Relative CBAM Exposure Index’, 2025.
7 World's Top Exports, ‘Iron ore exports by country’, 2023.
9 European Commission, ‘European Union: Trade in goods with Venezuela’, 2024.
