Bangladesh’s current CBAM exposure is limited, but potential EU expansion could intensify pressure on RMG exports, making decarbonisation, green finance and worker protection urgent priorities.
Bangladesh must accelerate efforts to cut carbon emissions in its garment industry and strengthen systems for measuring and reporting emissions, experts warned Sunday, saying export competitiveness could come under increasing pressure if the European Union expands its Carbon Border Adjustment Mechanism to textiles and apparel.
Bangladesh has limited direct exposure to the EU’s carbon mechanism for now, but a future expansion could significantly increase the country’s vulnerability because apparel is a major pillar of its export economy.
The warning was issued at an Expert Group Meeting hosted by the Centre for Policy Dialogue (CPD), a Dhaka-based think tank, to discuss findings from its draft study, Assessing the Impact of the EU Carbon Border Adjustment Mechanism (CBAM) on Bangladesh’s Export Competitiveness: A Scenario-Based Analysis of the RMG Sector.
CBAM entered its definitive phase on January 1, 2026. The EU mechanism requires a carbon price to be paid on embedded emissions in certain goods imported into the bloc, with the aim of aligning the carbon cost of imports with that faced by EU producers and reducing the risk of carbon leakage.
The mechanism currently covers six carbon-intensive sectors: iron and steel, aluminium, cement, fertilisers, electricity and hydrogen. These sectors were selected because they face a high risk of carbon leakage as companies seek to avoid stricter emissions costs in the EU.
Textiles and apparel are not currently covered.
The CPD study found that sectors currently subject to CBAM account for only 0.60 percent of Bangladesh’s total exports, meaning the country’s immediate exposure remains relatively small.
But the potential exposure is much greater under a future expansion. Sectors identified by the study as potentially vulnerable, including apparel, represent 81.61 percent of Bangladesh’s total exports and 39.75 percent of its exports to the EU.
The 81.61 percent figure does not mean that this share of exports is currently covered by CBAM. Instead, it indicates the scale of potential exposure identified by the study if carbon-related trade measures are extended to additional sectors.
Dr Fahmida Khatun, executive director of CPD, said in her welcome remarks that products currently covered by CBAM are not major exports from Bangladesh to the EU.
“However, the mechanism could become increasingly relevant if its scope is expanded in the future,” she said, stressing that the issue should not remain merely an academic exercise.
Khatun urged the government and industry to develop a clearer understanding of emission levels, establish appropriate carbon-accounting systems and assess the preparations needed to comply with evolving international climate-related trade requirements.
Presenting the study, Dr Sakib Bin Amin, professor of economics at North South University, said the analysis examined the possible effects of CBAM on Bangladesh’s ready-made garment export competitiveness, its interaction with the erosion of tariff preferences following graduation from the United Nations’ Least Developed Country category, wider economic impacts and measures to protect the sector.
The study also pointed to the prospect of overlapping pressures from CBAM and Bangladesh’s LDC graduation, which is expected to reduce some preferential trade access.
Under a CBAM-only scenario, the study estimated that exports would decline by 0.49 percent from the baseline. When CBAM is combined with the erosion of tariff preferences following LDC graduation, the projected decline rises to 1.30 percent.
Investment and gross domestic product are also projected to fall more sharply under the combined scenario.
The effects would vary across the economy. The study found that the RMG sector would bear a disproportionate share of the export impact, while workers with lower levels of education and poorer households would be particularly vulnerable.
It therefore stressed the need to incorporate just-transition considerations into Bangladesh’s response to emerging carbon-related trade measures, so that the costs of industrial decarbonisation do not fall disproportionately on vulnerable workers and households.
The study identified four broad priorities: decarbonising RMG production, diversifying export markets and products, protecting low-income and low-skilled workers and strengthening engagement with the EU in the context of LDC graduation.
It also called for an effective monitoring, reporting and verification system, stronger carbon-accounting capacity and greater access to international technical and financial assistance for green industrial upgrades.
During the discussion, Munir Uddin Shamim, director of Programme, Evidence & Learning at ETI, said the eventual impact of future regulations would depend substantially on the preparedness of factories, industry associations and the government.
He proposed assessing industry awareness, technical capacity and data-management readiness. Workers, he said, should not be viewed only as recipients of support but could also become agents of change by contributing to greater energy and resource efficiency.
Dr Benuka Ferdousi, senior research fellow at the Bangladesh Institute of International and Strategic Studies (BIISS), suggested adding indicators of industrial preparedness to the analysis, including energy efficiency, documentation, digital reporting and carbon-pricing capacity.
She also called for greater attention to economy-wide decarbonisation and the broader challenges facing Bangladesh’s energy sector.
Energy Sector Expert Rubiya Binte Mustafiz highlighted the need for skilled energy auditors, energy managers and machine operators to improve industrial energy management.
She called for a realistic assessment of energy-efficiency opportunities across the RMG value chain, together with improved access to appropriate technologies and financing, broader deployment of renewable energy and workforce training to manage technological changes.
Keisuke Iyadomi, senior climate change specialist at the World Bank, suggested that Bangladesh’s existing technological capacity and potential innovation pathways should be examined alongside the economic impacts identified in the study.
Such an assessment could help identify opportunities and gaps linked to different technological responses, he said.
Dr Rohini Kamal, assistant professor, research fellow and head of the Environment and Climate Change Cluster at BRAC Institute of Governance and Development (BIGD), cautioned that rooftop solar alone would not address the full challenge of industrial decarbonisation.
She called for greater clarity on carbon-accounting methodologies, particularly in determining how emissions associated with upstream production inputs are treated.
Kamal also argued that the costs of decarbonisation should be negotiated more strategically across global value chains, including through longer-term procurement commitments from international buyers.
Dr Fazle Rabbi Sadeque Ahmed, adviser to the Climate Change and Disaster Management Division at the Centre for Environmental and Geographic Information Services (CGIS), said Bangladesh’s decarbonisation pathway must reflect the country’s national circumstances and development priorities.
He highlighted just transition, climate finance, land scarcity, food security, ecosystems and energy security as issues requiring attention, alongside stronger national and international engagement.
From the industry, Mahbubur Rahman, DGM-Sustainability at Bitopi Group, said international buyers are already imposing increasingly stringent emissions-reduction requirements on suppliers.
Factories are investing in rooftop solar, energy efficiency and other measures, he said, but limited access to renewable energy remains a major obstacle to deeper decarbonisation.
Factories unable to meet buyers’ environmental requirements could risk losing orders to competing sourcing destinations, he cautioned.
Md Abdullah Hell Baki, vice president of the ICS Programme at IDCOL, highlighted ongoing renewable-energy financing initiatives and called for greater availability of concessional finance, faster grid connections and approval processes and stronger incentives for wider adoption of rooftop solar.
The discussion in Bangladesh comes amid a broader debate over whether carbon-border measures can accelerate industrial decarbonisation without placing disproportionate costs on developing and emerging economies.
As the EU’s CBAM moves through its definitive phase, governments and industries outside Europe are increasingly assessing how carbon-related trade requirements could affect market access, production costs, investment decisions and competitiveness.
Critics in developing and emerging economies have raised concerns that such measures could increase compliance costs for exporters and put additional pressure on countries with fewer financial and technological resources to decarbonise rapidly.
The debate also extends beyond the EU, as other economies examine carbon-border measures or related approaches. As a result, emissions data, carbon accounting and industrial decarbonisation could become increasingly important factors in international trade.
For Bangladesh, the issue is particularly significant because its export competitiveness depends heavily on access to major developed markets, while its industrial transition remains constrained by gaps in energy, finance and technology.
The debate comes ahead of COP31 in Antalya, Türkiye, scheduled for November 9–20, where governments will address broader questions of climate action, implementation, finance, technology transfer and inclusive transitions. For developing economies, the growing use of carbon-related trade measures adds another dimension to those discussions.
Financing is a particularly important issue for developing economies. Bangladeshi factories need investment not only in renewable energy but also in energy-efficient machinery, emissions measurement, digital reporting, skilled personnel and verification systems.
For Bangladesh, the challenge is not simply whether CBAM affects its exports today, but whether the country can use the current window to make its export industries cleaner, more resilient and competitive before carbon performance becomes an even more important factor in global trade.
Participants said Bangladesh’s relatively limited current exposure to CBAM should be treated as a preparation window rather than a reason for complacency.
They called for faster industrial decarbonisation, wider access to renewable energy, stronger carbon-accounting and MRV systems, workforce training, green financing, technological innovation and deeper engagement with the EU and international buyers.
The central challenge is to ensure that Bangladesh’s transition to lower-carbon production strengthens rather than undermines the competitiveness of its export economy while protecting workers and vulnerable households from bearing a disproportionate share of the adjustment costs.
