How countries around the world are responding to the EU CBAM (June 2025)

The EU CBAM (Carbon Border Adjustment Mechanism) presents a significant challenge for global trade. As the EU begins to gradually introduce carbon pricing at its borders, governments around the world are forced to reassess their climate policies and trade competitiveness. It is no surprise that countries are responding actively, with reactions falling into several broad categories. These range from legal and political opposition to efforts to introduce domestic carbon pricing tools or even develop national CBAM-style schemes.

This classification is not clear-cut as countries could simultaneously express different reactions. For example, India and China criticize the EU CBAM, while also advancing their own emissions trading systems. To make everything simple and clear, we assigned the country to only one classification group.

Countries which are contesting the EU CBAM include South Africa, India, Russia, China. Together they supplied 26.5% of extra-EU imports in 2024. These countries have chosen to confront CBAM directly through diplomatic channels or legal actions.

In particular, India has warned that CBAM could be a deal-breaker in its ongoing free trade agreement negotiations with the EU and has signaled possible WTO action. South Africa is also considering making a formal complaint at the World Trade Organization. Russia initiated a formal WTO case against CBAM in May 2025. Chinese steel association calls CBAM a new trade barrier and demands further talks about possible exemptions.

The Polish government is currently challenging CBAM introduction in the Court of Justice of the European Union, arguing that CBAM is essentially a fiscal mechanism, and the approval of fiscal mechanisms requires the unanimous consent of all EU member states. The case was filed on 8 August 2023 and it is still pending before the Court. Poland’s trade data was not used for calculating share of countries contesting CBAM in extra-EU imports as Poland is the EU member.

Several economies are exploring or developing their own CBAM frameworks, both to level the playing field and protect domestic industries. Such countries supplied 29.7% of extra-EU imports in 2024.

The United Kingdom will introduce its own CBAM from 2027, covering the same sectors as the EU’s one.Norway is also preparing to introduce CBAM in 2027. In the United States, lawmakers have proposed a “Foreign Pollution Fee” that would impose tariffs based on the carbon intensity of imported goods. Canada and Australia are in early stages of CBAM development. Taiwan intends to develop draft of CBAM regulations in second half of 2025.

Another possible response is to introduce or strengthen national carbon pricing mechanisms. They could ensure that carbon revenues stay within the exporting country rather than being paid to the EU. Countries from this group supplied 15.1% of extra-EU imports in 2024.

For example, Türkiye will launch a national ETS pilot in 2025, aligned with EU rules to offset CBAM liabilities. Indonesia is preparing a national ETS and has already launched a voluntary carbon exchange. Brazil passed legislation in May 2025 to establish a regulated carbon market. Japan is developing its voluntary carbon trading scheme (GX-ETS) that allows companies to trade emissions allowances. Israel plans to introduce excise-based carbon price on fuels. The Moroccan government is considering a carbon tax and plans to release a road map for its implementation next year.

Countries are also engaging directly with Brussels to negotiate bespoke deals. For example, Ukraine is preparing an appeal to the EU to postpone the CBAM. South Korea has established a dedicated CBAM task force and is in technical talks to ensure that its national carbon pricing system is credited under EU rules.

With the EU’s carbon tax (CBAM) coming into force, potential losses of investment in the Ukrainian economy in 2026-2030 could amount to $2.7 billion. Potential export losses during this period will amount to $4.7 billion. The European Union is currently Ukraine’s main trading partner and CBAM introduction will create additional obstacles for domestic companies supplying goods to the bloc.