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Brazil’s agribusiness braces for a new era under Europe’s carbon border levy

  • Writer: Amazon Connection Carbon
    Amazon Connection Carbon
  • Dec 6
  • 6 min read

Since 2023, the European Union has begun enacting the Carbon Border Adjustment Mechanism (CBAM) — a mechanism intended to put a price on embedded carbon in imported goods, combating so-called “carbon leakage”: the displacement of emissions to countries with laxer environmental standards. Under CBAM, companies exporting to the EU must eventually pay for the greenhouse-gas emissions associated with their production processes. By 2026, the scheme will shift from a reporting-only stage to one with real financial obligations: importers will either have to present carbon certificates (one per ton of embedded CO₂) or pay the equivalent carbon cost.


For Brazil — a major exporter of agricultural commodities and raw materials — this change arrives as a potential inflection point. Although CBAM initially targets heavy-industry goods (steel, cement, aluminium, fertilisers, energy), the regulatory architecture and ongoing debates suggest that the scope could widen in coming years to include agro-related goods or agricultural supply chains, especially those with high upstream emissions (e.g. fertiliser-intensive crops, energy-heavy processing, long logistics chains). For many producers, the message is clear: environmental footprint and carbon accounting are likely to become as important as price and volume.


CBAM: What it is — and how it is changing in 2025

The CBAM was formally approved in 2023 as part of the EU’s plan to reach net-zero emissions by 2050 and to cut greenhouse-gas emissions by 55% by 2030 (relative to 1990 levels). Under the mechanism, certain carbon-intensive imports — including steel, aluminium, cement, fertilisers, energy products among others — must report their embedded carbon emissions during a transitional phase (2023–2025).


Beginning in 2026, importers will face financial liabilities: they will need to acquire CBAM certificates equal to the CO₂ embedded in their products.


Importantly, in 2025 the EU adopted a set of simplifications under the so-called “Omnibus I” legislative package. Among the changes:


  • Companies that import less than 50 tonnes per year of CBAM-covered goods will be exempt — a threshold that will likely remove most small and medium-sized importers from compliance requirements.

  • The regulatory procedures — authorisation, calculation of embedded emissions, verification, financial liability rules — have been simplified for remaining importers, reducing administrative burden while maintaining the regulation’s carbon-pricing ambition.

  • The new rules preserve coverage of about 99% of CO₂ emissions linked to imports of key sectors (iron/steel, aluminium, cement, fertilisers, energy) despite the exemptions.


These modifications reflect a balancing act: ensuring the CBAM remains effective in curbing carbon leakage, while reducing complexity for smaller actors — and therefore potential backlash.


At the same time, the Brazilian Agency for Industrial Development (ABDI) — together with federal ministries — organized the first national workshop on CBAM in September 2025, bringing together authorities, industry players and experts to discuss potential impacts on Brazil’s export sectors and explore adaptation strategies.


Could CBAM expand beyond heavy industry — and what it would mean for agribusiness

As of now, CBAM does not explicitly cover agricultural goods. However, several factors raise the possibility of future expansion into agri-food sectors — particularly those with significant upstream emissions.


A recent analysis by the French ministry of agriculture, for instance, found that even without direct inclusion, agriculture and the agri-food industry could be indirectly affected due to their dependence on fertilisers (with embedded emissions) and energy-intensive processes. Under a scenario without adaptation, the value added in farming and agri-food sectors could drop by 0.36%–0.38% due to increased costs of fertilisers and electricity.


Moreover, at the EU level, there is ongoing discussion about a dedicated agricultural emissions trading scheme (“AgETS”) — a pricing system that could formalise carbon costs for farm-level emissions, including fertiliser use, livestock, land use changes and more.


If such mechanisms converge — e.g. CBAM expanded to include agro-inputs or products, and/or AgETS covering farm emissions — Brazilian agribusiness could face new compliance costs, certification requirements, demand for traceability of carbon footprint, or even trade barriers.


For Brazil — whose agribusiness often relies on fertilisers, long-distance logistics, commodity exports, and in many cases land-use changes — this could mean a substantial rethinking of production models: from input selection and land management, through energy use, to supply-chain transparency.


What Brazilian producers, policymakers and agribusiness stakeholders should consider now

Given this shifting terrain, the following steps emerge as strategic for Brazilian agribusiness players aiming to safeguard access to European markets — or simply preparing for future global carbon regulation:


  • Map and measure the carbon footprint of full supply chains: not only direct emissions, but indirect ones — from fertiliser use, energy consumption, logistics, processing, land-use changes. Such mapping will be critical to understand exposure and risks under CBAM or future carbon-pricing regimes.

  • Adopt low-carbon and regenerative practices: switch to organic or low-carbon fertilisers, reduce synthetic fertiliser use, adopt conservation agriculture or agroecology, optimise energy use — all of which can reduce embedded emissions and make products more competitive under carbon-conscious markets.

  • Invest in traceability, documentation and certification infrastructure: being able to certify a product’s carbon footprint may become a pre-requisite for export; early adoption can become a competitive advantage.

  • Engage in policy dialogue and anticipate regulation: as Brazil’s government and industry institutions (ministries, development agencies) begin to discuss CBAM adaptation, participation is important to shape favorable regulation, secure support for decarbonization, and avoid sudden disruptions. Indeed, the first national CBAM workshop in 2025 shows institutional awareness and could be the starting point of a coordinated national strategy.

  • Re-evaluate business models with global competitiveness in mind: under CBAM or future carbon-pricing regimes, competitiveness will shift — not just based on price or volume, but on sustainability credentials, emissions intensity, and carbon transparency. Producers that anticipate this shift may find new opportunities; those that don’t risk losing market access.


CBAM as potential inflection point — risk and opportunity

The CBAM is more than a new tax — it represents a structural change in global trade dynamics. For decades, exporters have competed primarily on volume, price and yield. The introduction of carbon pricing alters the rules: embedded emissions, energy intensity, supply-chain transparency, land-use practices and environmental footprint will increasingly matter.


For Brazil, a country with a large agribusiness sector deeply integrated into global supply chains, this can be a moment of transformation. On one hand, there is real risk — of market barriers, of increased costs, of lost competitiveness in the absence of adaptation. On the other, for producers willing to invest in low-carbon agriculture, regenerative practices and supply-chain transparency, CBAM may become a catalyst for modernization, sustainability and competitive differentiation.


In an era of growing environmental scrutiny by major markets — especially the EU — sustainability may evolve from being a competitive advantage to a de facto requirement. For Brazil’s agribusiness, the time to act could be now.


Sources:

  1. Council of the European Union — Press release, 25 April 2023: “Fit for 55: Council adopts key pieces of legislation delivering on 2030 climate targets”, which formally adopted CBAM. Conselho da União Europeia

  2. European Commission — Taxation & Customs Union, CBAM transitional phase regulation, 17 August 2023: detailing the reporting requirements during 2023–2025. Taxation and Customs Union

  3. EU Chemicals Platform — “Carbon Border Adjustment Mechanism (CBAM): EU’s initiative to combat carbon leakage”: summary of CBAM’s working mechanism, phases, and covered sectors (cement, steel, aluminium, fertilisers, energy). transition-pathways.europa.eu

  4. European Parliament / EPthinktank summary of CBAM — explanation of scope, transitional period (2023–2025) and full regime from 2026. Epthinktank+1

  5. Council of the European Union — Press release, 29 September 2025: “CBAM: Council signs off simplification to the EU carbon-leakage instrument” — describes 2025 changes under “Omnibus I” package, including threshold exemption (50 tonnes/year) for small importers, administrative simplifications, while keeping ~99% of emissions in scope. Conselho da União Europeia+2Conselho da União Europeia

  6. European Commission Directorate-General for Taxation & Customs Union — Official publication of CBAM simplifications, 20 October 2025: formal adoption of the updated regulation. Taxation and Customs Union

  7. Ministère de l'Agriculture, de l'Agro-alimentaire et de la Souveraineté alimentaire (France) — “The European Union’s Carbon Border Adjustment Mechanism: Challenges and Prospects for the Agricultural Sector” (analysis n° 207), May 2025: explores how CBAM affects fertilisers (including nitrogen fertilisers) and prospects for agricultural sector — including scenarios of broader extension toward agriculture. agriculture.gouv.fr

  8. PwC (PricewaterhouseCoopers) — “Carbon Border Adjustment Mechanism (CBAM)” overview: explains CBAM timeline (2023, reporting start; 2026, full financial obligations) and contextualizes its role under broader sustainability regulation frameworks. PwC

  9. EPRS / academic preprint — “Evaluating the EU Carbon Border Adjustment Mechanism with a Quantitative Trade Model” (June 2025): a quantitative economic–environmental modelling study estimating global trade and emissions impacts of CBAM; useful to illustrate potential macro-effects beyond just regulation. arXiv

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