Nicolas Endress is the chief executive and founder of ClimEase, a Swiss-based software company providing a platform designed to help businesses comply with the EU’s Carbon Border Adjustment Mechanism.

From the start of this year, the EU’s Carbon Border Adjustment Mechanism (CBAM) started to impose additional tariffs on imports of carbon-intensive products – from aluminium and steel to cement and fertilisers.

Large industrial producers based in the European Union have been paying a carbon price under the EU Emissions Trading System (EU ETS), Europe’s carbon market, for nearly two decades. The CBAM – the world’s first carbon border tariff – extends that carbon cost to goods entering the bloc from abroad.

The logic behind the mechanism is that since EU-based manufacturers have paid for the carbon emissions created during their production of goods using the EU ETS, so too should all the other nations that make the same goods.

However, as companies begin to prepare for the cost side of the CBAM, many are finding that the biggest savings today do not necessarily come from switching to cleaner production. Instead, they come from replacing default emissions values with verified emissions data using EU-approved methodologies and independent verification.

Moving from the default values can significantly reduce their exposure to carbon tariffs even when verified emissions are not especially low.

That could potentially disadvantage relatively efficient producers that do not have access to accredited auditors. If exporters’ capacity to secure verified data is distributed unevenly, the system risks perpetuating inequalities.

Default values inflate exposure

The CBAM requires all EU importers to report the “embedded” carbon dioxide equivalent (CO2e) emissions – that is, the total amount of greenhouse gas emissions – associated with the imported goods.

They must then compute the actual carbon cost based on the supplier’s reported product-specific emissions data. If no such product-specific emissions data is available, importers must instead apply the default emissions values stipulated by the European Commission.

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To evaluate emissions, manufacturers determine the total amount of fuel and other direct inputs used during the manufacturing process, such as the fuel burned during production at a steel mill.

These inputs are then converted into tonnes of CO2 using EU-approved methodologies. The results are subsequently verified by an independent expert who is accredited under EU rules. This verification process can be expensive and may be difficult to obtain in many developing countries.

CBAM also requires emissions from key precursor materials to be included. This means upstream suppliers’ emissions must also be calculated and verified. If they are not, importers must apply default values for those inputs.

Since these upstream processes can account for up to 80% of a product’s footprint, companies may still face significant exposure to default values even when their direct supplier’s emissions are verified.

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These default values are in general very high and often represent the maximum possible emissions of the most polluting facility within a specific country or region. A highly efficient steel plant in, for example, India, Brazil or Türkiye, would be evaluated as if it was the least efficient plant in that region due to the lack of formally verified emission data which meet EU standards.

Equity at stake

Equity issues exist here as well. Developing-economy suppliers that have actually decreased their emissions will likely see no decrease in their CBAM costs if they have not had their improvements officially recognised by the EU.

However, obtaining third-party verification requires time, expertise and financial resources, which can present practical challenges for some suppliers – especially those with complex supply chains that require multi-stage verification.

EU importers will have to apply the default values when no verified data is available, leading to significantly higher carbon costs even when the manufacturing process is relatively efficient.

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To address this imbalance, the EU could focus on expanding access to accredited verification, particularly in developing markets, while providing clearer guidance and standardised frameworks for emissions reporting across supply chains.

Improving recognition of credible local verification schemes and investing in digital reporting infrastructure would also help reduce reliance on conservative default values.

Without these adjustments, there is a risk that the CBAM rewards those best-equipped to navigate verification requirements, rather than those achieving the lowest emissions in practice.

In this new trade environment, data that proves efficiency – rather than low emissions alone – will determine which producers gain an advantage.

The post EU carbon tax risks penalising efficient producers over data gaps appeared first on Climate Home News.

EU carbon tax risks penalising efficient producers over data gaps

In an attempt to retain wealth from mining, Brazilian legislators have proposed the creation of a new state-owned critical minerals firm which would be responsible for developing the country’s vast reserves of rare earth minerals in partnership with foreign investors.

The initiative comes as the US mounts pressure to mine for Brazil’s critical minerals and secure access to supplies outside of Chinese control. But as the US government pushes for new investments, Brazil has struggled to work out how to take full advantage of its minerals, many of which are needed for green technologies.

In late March, Brazilian president Lula da Silva told the Africa-Latin America summit in Colombia that critical minerals are an opportunity for both continents to reject “being mere minerals exporters” and instead “produce nationally to develop our countries”.

In a series of bills introduced last week in the Brazilian Congress, pro-Lula lawmakers proposed the creation of a state agency called Terrabras, which would develop the country’s critical minerals. This is one of at least 13 bills seeking to regulate the sector, Brazilian officials said.

Brazil holds the world’s second-largest reserve – after China – of rare earths, a group of 17 elements such as neodymium and terbium which are key to producing electric vehicles (EVs) and the magnets used in wind turbines. But the country currently produces and refines less than 1% of the world’s rare earths, according to the International Energy Agency (IEA).

Mine to industrialise

Leonardo Durans, senior director at Brazil’s industry ministry, told a press briefing on Tuesday that the debate on how to manage the country’s critical minerals is “absolutely strategic”.

While rare earths are typically scattered and difficult to extract, Brazil’s deposits are found in ionic clay, which is more concentrated and cheaper to produce.

Durans said that Brazil has exported its minerals and imported manufactured technology like EV batteries, magnets and solar panels. “We want to break this logic definitively,” he said. “The directive is not to mine just for the sake of it anymore. We are going to mine to industrialise the country.”

At a global level, as the energy transition boosts demand for minerals, more developing countries are taking steps to reap the benefits from mining. At least 13 African countries have ordered export bans on raw minerals, seeking to create jobs and tax revenues by refining them domestically.

But, as Brazil’s Congress and regulators debate how to benefit from mining deals, the US government has ramped up pressures for mineral supplies. At a major forum hosted by the US government in São Paulo in March, officials said they have interest in at least 50 critical minerals projects – a category which includes rare earths – in Brazil worth billions of dollars.

Earlier in February, the US government gave a $565-million loan to Serra Verde, the company developing the Pela Ema ionic clay mine in the state of Goiás – which claims to be the only large-scale, heavy rare earths producer outside Asia. The deal includes an option for the US to acquire a minority stake in the company.

Meanwhile, Brazil’s rare earths exports to China boomed in 2025, according to the Brazil-China Business Council, as Chinese investors also race to secure supplies.

Durans said Brazil’s historical policy is to “be friends with all countries from every bloc”, and added that the country will not take a side with the US or China.

“We want to receive this capital that wants to invest in the country but with the counterproposal of joint technological development, so we can have a win-win between Brazil and the US, with the EU or with China,” Durans told journalists.

Critical minerals policy still unclear

Rodrigo Rollemberg, one of Terrabras’ proponents, told Congress that there’s a “race for our rare earths and for our critical minerals” but that “it is very important that we have a public company taking care of these resources”.

Rollemberg’s bill argues it “aims to position Brazil as an active player in the international geopolitics of critical minerals”, while also adding value to the minerals sector, industrialising the country and strengthening its “technological security”.

Mauro Sousa, general director of the National Mining Agency (ANM) and one of the country’s mining regulators, said that the government is currently working on a national policy for critical minerals, which is expected to be published in two to three months.

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One of the gaps at the moment is demand from inside Brazil for the manufacture of magnets, Sousa said, which would take time to build. He added that, while the country should start building its own internal supply chain, “we cannot give a 10, 15 or even 30-year leap that China has already made in a short time”.

Durans said the legislative proposal to create a state firm was “surprising”, as it did not arise from the federal government and was not previously consulted. He added that the government’s focus is on a policy that includes a roadmap for developing domestic supply chains, and requires foreign investors to add domestic value.

Mining industry “concerned”

The Brazilian Mining Institute (IBRAM), composed of mining companies representing 85% of Brazil’s production, expressed concerns over the Terrabras proposal, and argued in a statement that a new agency would not solve the challenges keeping the country from developing its vast rare earths reserves.

IBRAM argued that Brazil, which derives about 4% of its GDP from mining, already has regulatory agencies that have been underfunded for years. They argued that the country instead lacks industrial-scale refining technology, struggles with insufficient funding, “precarious logistical infrastructure” and a scarce workforce.

“None of these obstacles are eliminated by the creation of a public company,” IBRAM said in the statement.

Instead, IBRAM favoured a different bill introduced in Congress towards the end of 2025, which, it said, offers legal certainty, domestic processing, and incentives – “exactly what the sector needs to convert reserves into production”.

The post As US and China seek rare earths, Brazilian lawmakers push for state-owned developer appeared first on Climate Home News.

As US and China seek rare earths, Brazilian lawmakers push for state-owned developer

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