- CBAM, starting October 1, 2023, mandates importers to purchase carbon emissions certificates.
- Costs for these certificates will align with EU Emissions Trading System auction prices by January 1, 2026.
- Middle Eastern countries may adopt similar carbon pricing to align with CBAM, ensuring local revenue retention and compliance with global standards.
Experts suggest that the European Union’s newly enacted Carbon Border Adjustment Mechanism (CBAM) will significantly influence energy trade dynamics across the Middle East. CBAM, which took effect on October 1, 2023, mandates that importers procure certificates covering the carbon emissions associated with their imported goods.
From January 1, 2026, these certificates will be priced based on the weekly auction rates of the EU Emissions Trading System, effectively aligning costs with the carbon intensity of products. According to Engie Impact consultancy, CBAM is projected to incrementally increase the costs of these commodities by approximately 10% by its full implementation in 2034, initially targeting sectors like cement, steel, aluminium, fertilisers, electricity, and hydrogen.
CBAM’s primary aim is to safeguard EU industries subject to carbon pricing from unfair competition from imports from countries without comparable emissions controls. In response to CBAM, countries in the Gulf region and broader Middle East, renowned for their role as significant energy exporters, are considering developing their carbon pricing mechanisms.
These mechanisms would align with CBAM standards while allowing these nations to retain and reinvest carbon-related revenues domestically. This strategic move aims to balance economic interests with global climate goals, ensuring compliance with international norms.
Evangelos Beis, executive director at Blue Marble Disruptive Technology, based in Athens, emphasises CBAM’s transformative potential for the region. He underscores the opportunity for accelerated growth in cleantech sectors and forging new international partnerships in renewable energy and sustainability initiatives.
This proactive approach seeks to mitigate potential economic impacts and positions Middle Eastern countries as proactive participants in the global transition towards carbon neutrality and sustainable development.
As CBAM continues to evolve and expand, its implications for global trade and energy markets are expected to become increasingly pronounced, influencing investment strategies, technological advancements, and policy frameworks worldwide.