Report on impact of EU Carbon Border Adjustment Mechanism on Georgia’s economy recommends supporting businesses in adopting low-carbon and energy-efficient technologies

The European Union and the United Nations Development Programme have published an assessment on the ‘Impact of the EU Carbon Border Adjustment Mechanism (CBAM) on Georgia’s Economy’. The study examines the potential economic implications for Georgia of CBAM, which links market access and competitiveness to greenhouse gas emissions performance.

“The CBAM marks a significant shift in the global trading environment by linking market access and competitiveness to greenhouse gas emissions performance. As the EU’s climate policy increasingly shapes international trade rules, countries exporting carbon-intensive products to the European market must adapt to new reporting requirements, compliance obligations, and cost structures,” says the assessment description. “For Georgia, CBAM represents both a challenge and an opportunity. While its immediate macroeconomic effects are expected to be limited, the mechanism signals a broader transition towards low-carbon production and sustainable trade.”

Four CBAM-covered product groups were identified in Georgia: iron and steel, aluminium, fertilisers, and cement. However, due to negligible exports of cement, hydrogen, and electricity to the EU, the assessment primarily focused on fertilisers, iron and steel, and aluminium, the key findings say. Fertilisers are the most exposed sector, reflecting Georgia’s strong comparative advantage and significant export orientation toward EU markets. Iron and steel exports face growing exposure, as an increasing share of production is destined for the EU. Aluminium exports currently face relatively limited risks, given their low export volumes to the European market. 

“The overall macroeconomic impact is expected to be modest in the short term, with an estimated export reduction of approximately USD 10 million in 2026 and a projected GDP impact below 0.02%,” the study says.

To strengthen Georgia’s preparedness and maintain competitiveness in evolving international markets, the report recommends establishing a national Monitoring, Reporting and Verification (MRV) system for greenhouse gas emissions, supporting businesses in adopting low-carbon and energy-efficient technologies, and enhancing awareness, technical knowledge, and compliance capacity among affected companies.

The report also recommends strengthening cooperation between government institutions and the private sector to facilitate a smooth transition.

“While the short-term economic effects of CBAM are expected to remain limited, proactive adaptation will be essential to safeguard export competitiveness, attract green investment, and position Georgian industries for success in a rapidly changing global economy,” the report says.

This publication, also available in Georgian, has been produced by the Georgian organisation, PMCG, with support from the European Union and UNDP. 

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