Latin American and Caribbean exporters could improve their position in the European market as domestic carbon-pricing systems emerge, but the potential benefits differ significantly across countries and industrial products, according to a Carbon Pulse analysis.
The region has relatively limited overall exposure to the European Union’s Carbon Border Adjustment Mechanism (CBAM). Brazil represents around 2% of EU imports covered by CBAM, making it the largest supplier from Latin America and the Caribbean within the mechanism’s trade flows. The regional figure, however, masks significant differences in exposure. Trinidad and Tobago has considerable exposure through fertiliser exports, while Venezuela’s aluminium shipments and segments of the region’s steel trade face greater sensitivity to carbon-related costs.
Brazil and Colombia develop domestic carbon-pricing frameworks
The emergence of emissions trading systems in Brazil and Colombia could eventually enable eligible carbon payments made domestically to be recognised against part of an exporter’s EU CBAM obligation.
Colombia is planning a 2027–2029 pilot phase, followed by full operation in 2030. Brazil, meanwhile, is preparing a staged rollout of its domestic carbon market.
The timing remains important for companies exporting to the EU. Planned domestic carbon markets cannot currently be treated as an immediate reduction in CBAM liabilities. Free allowances and policy announcements do not constitute carbon costs actually paid, meaning they cannot automatically be considered equivalent to eligible domestic carbon payments.
Emissions performance becomes a competitiveness factor
The development of domestic carbon pricing could create benefits beyond the direct treatment of carbon costs under CBAM. Lower emissions intensity can strengthen industrial competitiveness, while domestic carbon pricing can potentially keep carbon-related revenues within the exporting country.
However, neither factor by itself guarantees improved export performance in the EU market. Exporters still require competitive production costs and reliable emissions records to translate lower carbon exposure into a commercial advantage.
For Latin American and Caribbean producers, the interaction between domestic carbon markets and EU CBAM compliance will therefore depend on the actual carbon costs paid, the emissions data available for exported products and the cost competitiveness of individual industrial supply chains.
