The EU’s expanding carbon border tax could put Bangladesh’s apparel exports at risk by 2030, adding pressure on the sector to cut emissions and stay competitive in Europe.
Bangladesh’s crucial apparel exports to Europe could face new pressure as the European Union moves ahead with its carbon border adjustment mechanism, widely known as CBAM, which aims to curb emissions embedded in imported goods.
Introduced in July 2021, CBAM is designed to encourage exporting countries to cut carbon dioxide emissions during production while imposing costs on those that fail to do so. In its initial phase, the EU plans to levy a carbon tax on six imported products including cement, fertilizer and steel from January 1, 2026.
Although apparel has not yet been included, the EU intends to gradually expand the mechanism to cover all imported goods by 2030. This raises concerns for Bangladesh, where clothing accounts for more than four-fifths of total exports and where the EU market absorbs over half of global apparel shipments.
The evolving policy landscape makes it critical to assess how CBAM could affect Bangladesh’s garment sector. The analysis highlights current levels of carbon dioxide emissions in the country’s apparel industry and estimates the potential carbon tax that could be imposed on Bangladeshi exports once the sector falls under the mechanism.
Such a development could significantly affect Bangladesh’s competitiveness in the European market, especially as the country prepares for graduation from least developed country status and the likely loss of preferential trade benefits in the EU.
The article underscores the urgency for policy action. It recommends that Bangladesh accelerate green energy adoption and introduce incentives to support low-carbon and environmentally sustainable production practices among export-oriented garment manufacturers.
Without such measures, the country’s leading export sector may face mounting challenges in maintaining its foothold in one of its most important markets.
