The European Union’s Carbon Border Adjustment Mechanism (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. 

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.

This assessment examines the potential economic implications of CBAM for Georgia, with particular focus on sectors and products covered by the mechanism. The analysis combines economic modelling, trade and competitiveness assessments, and extensive consultations with representatives of government institutions, businesses, industry associations, and experts. The objective is to support informed decision-making and help stakeholders in both public and private sectors prepare for the implementation of CBAM and future climate-related trade measures.

Key Findings

• 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.
• 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%.
• Sector-specific challenges may be substantial, particularly for fertiliser and iron and steel producers, which will face additional compliance costs related to CBAM requirements.
• CBAM is not only a trade measure but also a signal of a broader global trend in which carbon performance increasingly influences international competitiveness and market access.

Key Recommendations

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.
• Enhancing awareness, technical knowledge, and compliance capacity among affected companies.
• Strengthening cooperation between government institutions and the private sector to facilitate a smooth transition.
• Assessing the feasibility of domestic carbon pricing instruments and other regulatory measures aligned with emerging international climate and trade requirements.
• Integrating climate competitiveness considerations into Georgia’s broader industrial, trade, and economic development policies.

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.

Disclaimer

This publication has been produced by the Georgian organisation, PMCG, with support from the European Union (EU) and UNDP. Its contents are the sole responsibility of PMCG and do not necessarily reflect the views of the EU and UNDP.