Preparing for a US CBAM
Insights for Exporters from EU CBAM
The introduction of the European Carbon Border Adjustment Mechanism (EU CBAM) is one of the most significant efforts in climate trade policies in recent history – sparking worldwide conversations about carbon pricing. It places a price on the import of carbon intensive goods (aluminium, cement, iron, steel, etc.) to encourage cleaner production and prevent carbon leakage. While the EU CBAM is not yet in its operational phase, its ripple effects are already being felt worldwide with varying reactions from international trade partners. In the US, lawmakers, businesses and voters are now discussing the possibility of a US CBAM as many countries – including Japan, Turkiye and the UK begin planning for their own versions.
Despite initial resistance, the world will likely still need to engage with CBAM to maintain access to EU markets. Here we will break down the global reactions to EU carbon border adjustments, dive into the US response and political influences, and explore the possibility of a similar regulation in the US.
The US Response to CBAM
The US approach to sustainability and reaction to CBAM has been heavily influenced by politics with different approaches under the Biden and Trump administration.
- Under the Biden Administration:
- In 2020, the US disputed whether CBAM would be compatible with WTO standards stating that it was a disguised trade barrier.
- Despite initial resistance, Senator Chris Coons and Rep. Scott Peters proposed the first of several legislative adjustments in 2021 comparable to domestic US CBAM.
- Under the Trump Administration
- A stronger negative stance on it as the administration views it with high scepticism – categorising it as a climate tariff . In fact, the US Trade Rep. explicitly stated he wanted to it see scrapped stating it is harmful to trade partnerships.
- Along with threatening additional reciprocal tariffs, the Trump administration has taken a firm stance against climate action in the US.
Despite political divisions, the EU maintains that CBAM is a tool aimed at combatting climate change, not a trade weapon. To respond to criticism, the EU has been flexible with offering guidance tools, simplifying the rules and facilitating the transition. US exporters are advised to begin preparing emissions data for goods sold in the EU as compliance will soon be mandatory to maintain EU market access.
Proposed US CBAM legislation
Even with executive opposition, implementing US CBAM has been gaining bipartisan support. The idea is that it would encourage global carbon reduction and level the playing field for domestic industries. In fact, 75% of US voters said they would support a US CBAM once they were given an explanation – even in economies that are reliant on heavy manufacturing. Several bills have been introduced to congress reflecting diverse approaches to achieve lower emissions in US trade in similar ways to CBAM.
- FAIR Transition and Competition Act (2021)– Based on existing US environmental costs with exemptions for poorer nations
- Energy and Innovation Carbon Dividend Act (2023) – Applies direct carbon tax with rebates to US citizen
- Clean Competition Act (2023) – Applies an EU-Style carbon pricing with export rebates
- PROVE IT Act (2024) – measures carbon intensity of key materials through a data first approach
- Foreign Pollution Fee Act (2025) – Tiers imports by pollution levels while targeting China and Russia
While these proposals differ in design, they all aim to level the playing field between US producers and higher emission imports. Discussions regarding the implementation of a US carbon border adjustment have been underway since the introduction of the EU version but what would that look like and is it feasible?
How could a US CBAM work in practice?
Based on the proposed legislation and conversations surrounding the topic, a US CBAM could work to create fair competition, clearer production processes, and possibly deliver $200 billion over five years.
- Pricing Reference: The US industrial sector is considered to be on average 40% more carbon efficient than goods made elsewhere. Leveraging this would give the nation an opportunity to impose a price on the additional emissions of imported goods.
- Targeted Goods: A US CBAM would likely target similar commodities to EU – steel, aluminium, iron, cement, fertilisers, etc. Some proposals extend the scope to crude oil, lithium-ion batteries and critical minerals with room for further expansion.
- Revenue use: Depending on the bill, funds could be directed toward domestic decarbonization, R&D, dividends to citizens, or aid to developing countries.
Challenges facing a US CBAM
Proposals for an American CBAM would need to overcome significant logistical, socioeconomic and political barriers. Perhaps even more than the EU due to disjointed climate trajectories.
In the EU, CBAM is designed to align with the EU ETS where the US does not have a similar carbon market. While federal carbon pricing has been debated in the past, there has been no indication of progression – especially under President Trumps administration. Standardised carbon data accounting methodologies would be essential to establish a similar mechanism in the US.
Ensuring compatibility with WTO standards would also need to be considered to limit trade disputes and retaliatory measures. EU CBAM has been criticized repeatedly for this by countries included Russia and the US.
The bottom line: What do US Exporters need to know?
Despite international and domestic disagreements regarding CBAM, US exporters will still have to comply to have access to EU markets. Compliance will avoid the excessive costs of EU partners seeking alternative suppliers. Facing the immediate pressures of EU CBAM head on will set exporters up for success in the new operational period starting in 2026. While US CBAM has been a topic of conversation, explicit carbon pricing mechanisms in legislation are unlikely to take place, at least until 2028.
At Carbon Complete, we understand that navigating CBAM compliance – whether under in the EU or the US – is complex and resource-intensive. That’s why we offer tailored services to help businesses stay ahead. This can include CBAM training programmes, reporting support, risk assessments, and strategic consultancy. By equipping your company with the right tools and expertise, we ensure you’re not only compliant but also positioned to thrive in a rapidly changing global trade environment.
