The Impact of CBAM on Australian Industries in 2025

How the CBAM (Carbon Border Adjustment Mechanism) impacts Australian industries in 2025 and beyond.
A Growing Obligation for Emissions Reporting
As the European Union (EU) ramps up its climate ambitions, the imposition of tariffs under the Carbon Border Adjustment Mechanism (CBAM) marks a pivotal shift in international trade dynamics. Australian industries, particularly those involved in carbon-intensive goods such as steel, aluminium, cement, fertilizers, and energy products, are set to face significant new challenges and obligations due to this mechanism. The CBAM, aimed at addressing the issue of carbon leakage, could reshape Australia’s export landscape while introducing stricter requirements for carbon emissions measurement and reporting.
Understanding the EU’s Carbon Border Adjustment Mechanism (CBAM)
The CBAM is a tariff system designed to level the playing field for EU industries facing higher production costs due to stringent climate policies. It seeks to prevent carbon leakage—where businesses relocate carbon-intensive production to countries with less stringent climate regulations—by imposing tariffs on imported goods that fail to meet equivalent environmental standards. This system targets key sectors such as cement, iron, steel, aluminum, fertilizers, electricity, and hydrogen, which are traditionally more carbon-intensive.
While the CBAM has the potential to encourage cleaner production in non-EU countries, it creates a compliance burden for Australian exporters. The mechanism is set to roll out in phases, with a transitional period starting on 1 October 2023. During this period, EU importers are required to report the carbon emissions embedded in the goods they import. However, the mandatory surrender of CBAM certificates will only begin in January 2026, giving businesses time to refine their emissions measurement and reporting methodologies.
Implications for Australian Industry
The CBAM’s introduction means that Australian industries exporting to the EU will face two significant changes:
- Tariffs on Carbon-Intensive Goods: Products such as steel, cement, and fertilisers, which are essential exports from Australia, will no longer enjoy a price advantage if they are carbon-intensive. As a result, EU tariffs on these goods could lead to reduced demand for Australian exports to the EU, with European buyers opting for products from regions that have stricter carbon pricing or lower carbon footprints.
- Obligations for Greenhouse Gas (GHG) Emissions Data: In order for EU importers to comply with the CBAM, they will need accurate GHG emissions data for the products they import. This means that Australian exporters will need to begin measuring and reporting their emissions according to methodologies that align with CBAM requirements.
One of the key aspects of the CBAM is its demand for detailed emissions data from non-EU exporters. Until the transition phase ends, there are different methodologies for calculating emissions, and Australian businesses must adapt to these methods to remain competitive in the EU market.
Preparing for the Future
Given the growing importance of emissions data under the CBAM, Australian industries must start measuring their greenhouse gas emissions in compliance with EU standards. This requires accurate tracking and reporting of emissions across the production process, which may involve investments in new monitoring technologies or updating existing systems.
The need to comply with these regulations is not just about avoiding tariffs—it’s about ensuring that Australian industries remain competitive in global markets. As countries and trading blocs like the EU and the United States move towards stricter emissions regulations, the ability to report and reduce carbon emissions will become a critical factor in securing market access and maintaining international trade relationships.
Conclusion: A Call to Action for Australian Industries
In principle, Australian industries should implement emissions accounting that follows international rules and standards using approaches developed in the context of other countries’ border carbon adjustments (e.g., reporting for the EU and UK CBAMs), and measured in line with IPCC methodological guidelines.
The CBAM presents both a challenge and an opportunity for Australian industries. While the immediate concern may be the introduction of tariffs, the longer-term impact will be the growing need for accurate and transparent emissions data. Australian exporters must begin to engage with the measurement methodologies required by the EU now, in order to ensure compliance and safeguard their position in the European market.
In the coming years, the CBAM will likely serve as a model for other regions looking to tackle carbon leakage and promote clean industry practices. For Australia, this means preparing for carbon emissions reporting obligations that are set to become the norm in international trade. Those who act early to measure, report, and reduce their emissions will be better positioned to thrive in a low-carbon global economy.
