The EU Carbon Border Adjustment Mechanism (CBAM) could create significant credit risks for individual industrial borrowers even as its aggregate effect on European trade remains relatively small, according to a European Central Bank (ECB) working paper published in January 2026.
The study, prepared by Geoffroy Dolphin and Gianluigi Ferrucci, estimates that CBAM’s direct impact represents approximately 0.1% of the value of total EU imports when averaged across all goods. For non-EU trading partners, the estimated average cost amounts to around 0.04% of the value of exports to the EU, although the impact reaches 1.2% in some cases.
These economy-wide figures coexist with potentially substantial effects on particular industrial products and exporting countries. For banks and other lenders, the distinction means that aggregate trade indicators may not adequately capture the exposure of individual companies dependent on CBAM-covered exports.
Industrial borrowers face different levels of carbon exposure
A company’s financial vulnerability depends on its product mix, emissions intensity, contractual arrangements and ability to provide verified actual emissions data. A steel processor heavily reliant on European customers, for example, may face a different level of commercial pressure from the broader economy in which it operates.
Borrowers using relatively low-emission production methods may be better positioned to demonstrate their emissions performance when EU customers can use verified actual data under the applicable CBAM rules. Conversely, companies with incomplete emissions records may leave their European buyers dependent on less favourable default values, potentially increasing carbon-related purchasing costs.
The resulting financial pressure can affect operating margins, working capital and the predictability of future cash flows. These differences make company-level exposure an important consideration for lenders financing industrial production and cross-border trade.
Steel, aluminium and precursor emissions enter credit assessments
For banks financing steel and aluminium producers, evaluating CBAM exposure increasingly requires information about emissions associated with relevant production processes and precursor materials. Differences in manufacturing routes and upstream inputs can affect the emissions attributed to finished products.
Import-dependent manufacturers also face potential cost pressures where carbon-related liabilities increase the cost of purchased inputs. The allocation of these costs between suppliers and buyers becomes particularly relevant when long-term contracts do not clearly specify which party bears the liability.
Lenders assessing these businesses need to consider how carbon-related costs could affect procurement arrangements, selling prices and margins. Borrowers with reliable emissions data and contractual provisions addressing carbon costs may have a different financial risk profile from companies whose forecasts do not adequately account for these factors.
Renewable electricity projects face separate eligibility requirements
Renewable electricity investments introduce another dimension of CBAM-related credit exposure. Power producers may anticipate a commercial premium from supplying lower-carbon electricity to EU markets, but lower-carbon generation does not automatically establish eligibility for favourable treatment under the electricity component of CBAM.
Access to actual-emissions treatment depends on compliance with specific documentation, contractual and physical electricity delivery requirements. Renewable electricity producers and their lenders must therefore distinguish between the environmental attributes of generation and the evidence needed to qualify for the relevant CBAM treatment.
For financing assessments, this distinction matters when projected revenues depend on cross-border electricity sales and the assumption that lower emissions will translate into a commercial advantage.
Borrower-level analysis needed alongside macroeconomic stress tests
For existing lending portfolios, an immediate priority is identifying companies whose financial forecasts assume continued access to EU markets without sufficient allowances for potential carbon costs. Broad macroeconomic stress tests may not reveal the vulnerabilities of individual exporters whose revenues are concentrated in covered products.
The ECB study’s findings point to the relevance of borrower-level carbon cost analysis, emissions verification readiness assessments and realistic export pricing scenarios in credit risk management.
These assessments can help lenders distinguish between companies able to document their emissions and manage the associated costs and those whose margins may deteriorate if carbon liabilities exceed their financial assumptions.
