Executive summary The introduction of border carbon adjustments (BCAs) as a new feature of the carbon-pricing landscape highlights a fundamental tension between climate and trade. The European Union’s Carbon Border Adjustment Mechanism (EU CBAM), for example, is designed primarily to prevent carbon leakage and ensure the equivalent treatment of domestic and imported goods. In doing so, it may enable greater domestic ambition, thereby supporting the objectives of the Paris Agreement; however, it also raises concerns about trade protection, competitiveness and economic growth. Companies now face the dual challenge of meeting climate goals while maintaining market access and profitability. Policy uncertainty is high, and jurisdictional fracturing seems likely, as each BCA (if/when implemented) may have different scopes, reporting periods and cost calculation methods, creating additional trade barriers and administrative complexity. At the same time, BCAs create novel opportunities to align decarbonization efforts with long-term competitive advantage. For companies, these mechanisms influence which markets are more advantageous, how supply chains are organized and where capital flows. While BCAs introduce new costs and compliance obligations, they also create opportunities for strategic differentiation, resilience and long-term growth. The scale of the opportunity is substantial. The World Bank’s State and Trends of Carbon Pricing 2025 report1 highlights that there are 80 carbon taxes and emissions trading systems (ETSs) in operation worldwide, with five being introduced over the past 12 months, covering 28% of global emissions, with economies representing nearly two-thirds of global economic output having implemented either a carbon tax or an ETS. For carbon-intensive sectors such as steel, cement, mining and energy, early alignment with carbon policies can mitigate risk, unlock emerging green markets, attract low-cost capital and strengthen competitiveness in a volatile global environment, provided that mechanisms like BCAs duly recognize effective carbon prices already paid.The emerging landscape of carbon border adjustments is redefining competitiveness, creating risks and opportunities in trade, strategy and global market positioning. Climate and Competitiveness: Border Carbon Adjustments in Action 4

Climate and Competitiveness Border Carbon Adjustments in Action 2025