THE EDITOR: TT stands at a critical juncture in balancing economic growth with environmental responsibility.
The European Union's Carbon Border Adjustment Mechanism (CBAM) presents both a challenge and an opportunity. A recent International Monetary Fund (IMF) working paper recommends that Trinidad and Tobago implement a carbon-pricing mechanism to reduce greenhouse-gas (GHG) emissions and mitigate CBAM risks.
While this may seem daunting for a fossil-fuel-dependent economy, it is an essential step to future-proof our industries, protect exports, and secure long-term economic stability.
CBAM is the EU's response to what is known as 'carbon leakage' - the tendency for companies to move production to countries with weaker climate policies to avoid paying carbon costs. CBAM places a price on the carbon emissions embedded in imported goods from nations without equivalent carbon-pricing measures. Its implementation is structured in two phases. The first, a transitional phase running from October 1, 2023- December 31, 2025, requires importers to report emissions without financial penalties.
The second phase, starting January 1, 2026, will require importers to purchase CBAM certificates to offset the carbon content of their goods, with prices linked to the EU's Emissions Trading System (ETS).
This mechanism is particularly significant for TT. Approximately 5.1 per cent of our exports, valued at US$46 million, are vulnerable to CBAM-related tariffs. Industries such as fertilisers, aluminium and petrochemicals, which form the backbone of our economy, could lose competitiveness in the EU market unless we align with international climate policies. Without a domestic carbon-pricing framework, these industries may face new financial barriers that weaken their global position.
Carbon pricing is a proven economic tool that assigns a financial cost to carbon emissions, incentivising businesses to lower their environmental impact. Countries typically implement it through either a carbon tax, which sets a fixed fee per ton of carbon emitted, or an emissions trading system (ETS), where businesses trade emissions allowances under a capped system.
For TT, implementing a carbon-pricing framework is more than regulatory compliance - it is a necessary step to ensure economic resilience and attract investment.
Ignoring CBAM's implications would be costly. Exporting industries would struggle with increased tariffs, and investor confidence would likely decline as global markets favor countries with stronger climate policies. However, proactive measures could provide new revenue streams, which could be reinvested into renewable energy, infrastructure, and social programmes.
The economic benefits of carbon pricing extend beyond protecting exports. In the short term, it could generate revenue to fund green projects, create jobs in renewable energy, and assist industries in transitioning to low-carbon production. It would also safeguard access to the EU market, ensuring that key sectors remain competitive. In th
