CBAM, Mercosur and the Debate on Global Carbon Pricing

New trade agreements in the tension field of climate policy

The European Commission has proposed the conclusion of two major trade agreements: the EU-Mercosur Partnership Agreement and the modernized Global Agreement with Mexico. They are intended to create market access, strengthen geopolitical resilience, and expand strategic partnerships. However, they also raise sensitive questions for the Carbon Border Adjustment Mechanism, particularly regarding carbon leakage and regulatory coherence. The agreement with the Mercosur countries – Argentina, Brazil, Paraguay, and Uruguay – would create one of the largest free trade zones in the world. At the same time, concerns are growing that tariff-free exports from emissions-intensive industries without comparable carbon pricing could undermine the effectiveness of CBAM. The EU rules explicitly state: An exemption from CBAM is only possible if the partner country demonstrates an equivalent pricing system.

Brazil sets its own accents – debate on global carbon pricing

Particularly noteworthy is that Brazil, as the most important Mercosur partner, is pursuing a new climate policy agenda. With COP30 in Belém in view, the government aims not only to advance rainforest protection but also to push for the introduction of an international framework for carbon pricing systems. The idea is that not only the EU, through CBAM, sets the global standard, but that a “coalition” of major economies – led by Brazil, the EU, and China – develops common ground rules for the interaction of their systems. This would make CBAM indirectly a lever for international climate policy: those who introduce their own carbon pricing system reduce the levies at the EU border and keep the revenues in their own country. Brazil has already passed legislation last year to establish an emissions trading system that will be fully operational by 2030. This is a clear signal of not merely accepting CBAM but transforming it into a global solution.

What this means for CBAM

For the EU, this creates both opportunities and risks. On the one hand, coordinated carbon pricing could strengthen CBAM’s credibility and avoid double taxation. On the other hand, the question arises whether the EU is willing to make concessions to its model, for example through more flexible rules for emerging economies or partial use of CBAM revenues for international climate finance. For companies, one thing remains decisive: CBAM obligations apply regardless of free trade tariffs, as long as there is no formal equivalence in carbon pricing. Even with the new trade agreements, importers from Mercosur and Mexico will therefore have to report emissions and purchase CBAM certificates, unless Brazil and other partners actually implement their announcements and establish comparable pricing systems.

Outlook

The coming months will show whether trade and climate policy can be more closely interlinked. The ratification of the agreements in the EU and the preparations for COP30 in Brazil are running in parallel, with potentially significant influence on CBAM’s next development phase. For companies with supply chains in Latin America, this means: closely monitoring developments, securing emissions data from the region, and preparing for scenarios in which regional carbon pricing systems emerge and CBAM rules are dynamically adjusted.

Support with alignment

If you would like to know how these trade agreements or the global carbon pricing debate could affect your CBAM obligations and supply chains, please feel free to contact me directly: helge@kolum.earth.