Why the EU CBAM could trigger carbon pricing adoption in Canada, Japan, South Korea, and Taiwan

The EU's Carbon Border Adjustment Mechanism could drive a significant expansion of carbon pricing beyond Europe, with Canada, Japan, South Korea, and Taiwan among the countries likely to introduce their own schemes to avoid paying the bloc's import fee. That is the central finding of a new study led by the Potsdam Institute for Climate Impact Research, published this week. The mechanism effectively creates a financial incentive for exporting countries to price carbon domestically, since a domestic carbon price can offset the CBAM levy owed at the EU border.

For European procurement and ESG teams, the ripple effect matters because it reshapes the carbon cost landscape across some of the continent's largest trading partners. If Canada, Japan, South Korea, and Taiwan all move toward domestic carbon pricing in response to CBAM, the supplier emissions data picture changes considerably. Suppliers in those jurisdictions will face increasing regulatory pressure to measure and report their own carbon output, which could gradually improve the quality of Scope 3 data available to European importers.

The CBAM entered its transitional phase in October 2023 and covers iron and steel, cement, aluminium, fertilisers, electricity, and hydrogen. The definitive phase, in which financial adjustment obligations take full effect, is scheduled to begin in 2026. Companies importing covered goods from the countries identified in the PIK study should monitor whether new domestic carbon pricing legislation emerges in those jurisdictions, since it would affect both their CBAM liability and the emissions factors they apply to imported inputs.

Sustainability and tax teams at large European manufacturers and importers will need to work more closely together as CBAM matures. The mechanism is no longer purely an environmental policy instrument for compliance teams to track in isolation. It is becoming a trade cost variable that interacts directly with procurement decisions, supplier selection, and GHG Protocol Scope 3 category calculations for purchased goods and services.

The PIK finding also adds pressure to the broader argument that the CBAM is one of the most consequential climate policy exports the EU has produced. Its ability to catalyse carbon pricing in jurisdictions outside Europe depends on how consistently and rigorously the mechanism is enforced. ESG professionals watching the CBAM transition should treat the emerging domestic pricing responses in Canada and the Asia Pacific region as a leading indicator of how global Scope 3 data quality may evolve over the next reporting cycle.