Kazakhstan’s exporters race to adapt to Europe’s carbon border tax

Kazakhstan’s aluminium, iron, and steel sectors are expected to face the greatest impact from the European Union’s Carbon Border Adjustment Mechanism (CBAM), according to Fabiana Fong, component lead at the International Trade Centre (ITC).

Speaking at the presentation of a CBAM impact assessment report in Astana on 3 June, Fong described the study as a practical guide to help Kazakh exporters understand EU requirements and take concrete steps toward compliance with the bloc’s carbon pricing rules.

The report, prepared by the ITC in partnership with QazTrade Trade Policy Development Center, analyzes the potential effects of CBAM on Kazakhstan’s key export sectors. It offers a phased compliance roadmap, detailed guidance on emissions reporting, and recommendations for deeper cooperation with EU partners to preserve competitiveness in European markets.

What is CBAM?

CBAM is the EU’s tool to ensure that imported goods carry a carbon price equivalent to what European producers pay under the EU Emissions Trading System. It forms a central part of the EU’s strategy to cut greenhouse gas emissions and prevent “carbon leakage,” where production shifts to countries with weaker climate policies.

Fong emphasized that compliance is a highly technical process. Companies must accurately measure, calculate, and report direct and indirect emissions across their entire production chains. The report breaks down complex methodologies and provides step-by-step instructions to help exporters avoid costly pitfalls.EU Perspective

Johannes Baur, head of cooperation at the EU Delegation to Kazakhstan, noted that the EU aims to reduce net greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels. CBAM ensures a level playing field by applying comparable carbon costs to imported products.

“Kazakhstan remains an important trade and investment partner for the EU,” Baur said. While Kazakhstan’s overall exposure is lower than that of some neighbors, the mechanism will still affect key exports such as aluminium and steel. He encouraged Kazakhstan to strengthen its domestic emissions trading system to better align with EU standards and reduce future CBAM costs for exporters.

Key findings and warnings

Joost Pauwelyn, law professor at the Graduate Institute in Geneva and ITC lead expert, warned that CBAM is now a permanent reality for exporters targeting the EU market. Companies that fail to monitor and report their actual emissions risk being charged according to high EU default values, which assume carbon-intensive production and include additional markups (currently 10%, rising to 30% by 2028).

The report highlights stark figures: The EU accounts for 54% of Kazakhstan’s aluminium exports. At a carbon price of €80 per ton, CBAM costs for aluminium could reach around €5.6 million (US$6.5 million), or roughly 2% of export value.

For iron and steel, the impact could be far more severe. Using default values, costs could exceed €108 million (US$125 million) – equivalent to over 100% of the value of certain steel exports in some cases.

Pauwelyn stressed that proper monitoring, verification, and reporting of actual emissions could cut total annual CBAM liabilities from approximately €114 million down to €57 million.

Kazakhstan’s domestic carbon price – currently around €0.40 per ton – remains far below the EU’s €80 per ton. As long as this gap persists, exporters will effectively pay the full EU carbon price on top of any domestic charges.

Raising Kazakhstan’s domestic carbon price, combined with improved emissions monitoring and reporting systems, could significantly lower costs for exporters while allowing the government to retain more carbon revenues at home. Coordinated efforts among government agencies, exporters, and international partners will be essential to minimize compliance burdens and safeguard competitiveness.

Risks and challenges for the EU

The EU seeks to diversify critical raw materials away from China. Kazakhstan is a prized partner for aluminium, uranium, and other minerals. CBAM adds costs (potentially millions for Kazakh aluminium/steel exports to the EU) and compliance burdens, which could divert supplies to less demanding markets (e.g., China or others).

According to an IMF 2025 analysis on ME&CA region, including Kazakhstan, overall burden on trading partners is modest (0.03% of GDP regionally), but concentrated in high-emission sectors. For Kazakhstan, aluminium, steel, and fertilizers face significant exposure (up to 8–30% tariff equivalents in some cases). This could divert supplies to less demanding markets amid global CRM competition.

But CBAM is more strategic climate-industrial policy than pure self-harm. It forces the EU (and partners) toward genuine decarbonisation rather than offshoring emissions. However, in a world scrambling for critical materials, the added friction risks making the EU a less attractive buyer- especially versus competitors offering fewer strings. Success depends on complementary tools: technical assistance to partners like Kazakhstan, credible carbon crediting, and avoiding over-expansion that harms downstream EU firms.