Canada is facing a carbon tariff threat from the European Union within months as the economic bloc fully implements its Carbon Border Adjustment Mechanism (CBAM).<\/p>\n
According to internal documents CBC News obtained through an access to information request, Canadian iron, steel and aluminum are not exempt from the carbon tariff even with Canada’s national price on carbon and its decade-old trade deal with the European Union.<\/p>\n
The memo from Global Affairs Canada signed on Dec. 10, 2025, describes the CBAM as a “border charge” or “effectively a ‘carbon tariff.'”<\/p>\n
With the Canada-EU Summit this week in Montreal, Ottawa’s diplomats continue to seek an agreement with Brussels before Canadian exporters face additional compliance costs and a carbon charge that European importers will have to pay at the border in 2027.<\/p>\n
Prime Minister Mark Carney said on Tuesday that the summit marks the start of negotiations for Canada to become a closer strategic partner to the 27-member bloc.<\/p>\n
Global Affairs estimates $2.8 billion worth of goods annually are exposed to the carbon import levy \u2014 primarily on metals that are already impacted by U.S tariffs.\u00a0<\/p>\n
The internal note flags “risks” with the implementation of the carbon tariff “occurring as Canada seeks to diversify trade away from the U.S. and toward markets like the EU.”<\/p>\n
It adds Canada’s exposure to the tariff “appears modest” overall but the “potential impacts vary considerably across provinces and territories” \u2014 hitting Newfoundland and Labrador and Quebec particularly hard.\u00a0<\/p>\n
The briefing note states that an annual average of $885 million worth of the Atlantic province’s iron and steel exports \u2014 almost half \u2014 are exposed to the EU’s incoming tariff.<\/p>\n
In Quebec the value of aluminum, iron and steel exports that are exposed amounts to about $792 million annually. <\/p>\n
Those figures are averages based on data between 2021 and 2024, meaning exposure could be higher as Canadian goods seek new buyers to avoid U.S. tariffs.<\/p>\n
‘Big change’ to trade regime<\/p>\n
Climate trade experts have been warning about the pending EU carbon charge for some time.\u00a0\u00a0<\/p>\n
“It’s a big deal conceptually,” said Ross-Linden Fraser, an acting director at the Canadian Climate Institute. “This is a big change in the way that trade gets treated.”<\/p>\n
The EU’s carbon border adjustment mechanism is being applied at a low level and will ramp up to fully in 2034.\u00a0It’s meant to encourage exporters to lower the planet-warming emissions created when producing their industrial goods.<\/p>\n
But Canadian steel, aluminum, iron and cement exporters are already incurring costs for compliance, having to measure the emissions embedded in their exports and have those figures reviewed by an accredited verifier.<\/p>\n
“That’s a costly prospect,” said Aaron Cosbey, an economist who researches carbon border adjustments at the International Institute for Sustainable Development.\u00a0<\/p>\n
The EU, however, is exempting countries like Switzerland, Norway, Iceland and soon the U.K. That’s because their carbon pricing systems are linked or fall under Europe’s carbon market, the EU Emissions Trading System.<\/p>\n
The briefing note obtained by CBC News explicitly states that an “exemption \u2026 is not currently possible” for Canada because our carbon price is not linked to Europe’s.<\/p>\n
“In 2025, the EU carbon price is approximately $134 per tonne, compared to $95 per tonne [in Canada],” according to the briefing note.<\/p>\n