Many industrial players are racing to go green ahead of the implementation of the EU’s Carbon Border Adjustment Mechanism (CBAM), which will come into full effect at the start of 2026. Notoriously energy-intensive sectors like fertilizer, cement, steel, and aluminum production are especially vulnerable to the approaching carbon border tax that will require exporters to the EU to pay a carbon levy based on the un-taxed emissions embedded in their products.

(Tap or click the headline above to read this story with all of the links to our background as well as external sources.)

Often referred to as the carbon border tax, the CBAM is a carbon emission tax imposed on goods that are imported into the EU. It is designed to put a “fair price” on emissions from the production of carbon-intensive goods that are imported into EU member countries and aims to “encourage cleaner industrial production in non-EU countries,” according to the EU Commission. The carbon border tax will make up the difference between the local carbon price — if there is one — and the EU’s carbon price.

The measure is designed to prevent “carbon leakage,” or the offshoring of production to countries with lower environmental standards, but it has drawn criticism from developing economies for shifting the costs of climate action onto them. The EU program starting on 1 January will be followed by a similar program for exports to the UK at the start of 2027.

Egypt could lose USD 317 mn annually if exporters fail to comply with the new rules — losses that could climb further as exports expand without decarbonization, a senior government source told EnterpriseAM. Steel and iron exports would take the biggest hit, at roughly USD 236 mn, followed by aluminum at USD 43 mn.

But companies — private and public — are working to limit the impact by moving to align with the guidelines. The state has also been keeping a close eye on the CBAM implementation committee, where it holds observer status.

The Public Enterprises Ministry is helping to coordinate industrial decarbonization, giving oversight for state-owned companies as they cut emissions and prepare for CBAM compliance. The focus is on energy-intensive industries such as aluminum, fertilizers, and cement, where export competitiveness is at risk.

The ministry has rolled out a comprehensive plan to monitor emissions and improve environmental performance, according to Public Enterprises Minister Mohamed El Shimi. The plan includes periodic carbon assessments, energy efficiency upgrades, and the creation of specialized in-house teams to prepare carbon footprint reports in line with international standards. Workshops on carbon markets and green financing are also being organized to support Egypt’s broader green economy agenda.

Egyptian Chemical Industries — or Kima — in Aswan is among the industrial players investing heavily to curb emissions and boost energy efficiency. Kima is pushing ahead with its Kima 3 nitric acid and ammonium nitrate project, studying the establishment of a solar power plant to meet part of its electricity demand, and building a CO2 liquefaction unit to capture and reuse emissions for industrial purposes. A full carbon footprint assessment is also underway, alongside efforts to link older production lines to newer, more efficient systems.

Meanwhile, Egypt Aluminum is pursuing one of the industrial sector’s most ambitious decarbonization programs. The company signed a 25-year power purchase agreement with Norway’s Scatec in March to build a solar plant that will supply 1.1 GW of clean energy to its Naga Hammadi complex — one of the country’s largest renewable power projects for industry. Egypt Aluminum also secured the ASI Performance Standard V3 certification, confirming its adherence to top environmental, social, and governance benchmarks.

Despite progress, financing remains a major hurdle. While the government has made measurable strides in reducing industrial pollution — particularly in cement — further emissions reductions will require significant domestic and international funding, head of the Environment Ministry’s Central Department for Air Quality and UN environmental and energy expert Mostafa Murad told EnterpriseAM.

REMEMBER- Egypt obtained EUR 271 mn in funding for the Green Sustainable Industries (GSI) program last year, through soft loans from the European Investment Bank, the EU, and the French Development Agency, with German collaboration to assess CBAM’s impact on key export sectors like steel and cement. Egyptian banks are also offering green loans to help manufacturers upgrade their facilities and meet compliance requirements.

Still, Murad warned that green technologies remain prohibitively expensive for many local producers, driving up product costs and reducing competitiveness both locally and abroad. International financial support is still far below what’s needed to fund the industrial sector’s green transition, he said, calling for stronger global cooperation to finance climate action.

The private sector is also calling for more accessible financing mechanisms. Expanding revolving credit facilities and offering interest-free loans for new industrial equipment and renewable energy systems could help manufacturers comply with environmental standards while boosting exports, treasurer of the Federation of Egyptian Chambers of Commerce, Mohamed El Fayoumi, told EnterpriseAM. He stressed that the industrial sector — Egypt’s largest contributor to GDP — must be supported in its green transformation to remain competitive in global markets.

As CBAM’s start date approaches, the government is considering a domestic carbon tax to capture revenue that would otherwise flow abroad. A government source told EnterpriseAM that if the EU proceeds with implementation in early 2026, Egypt will move to collect carbon-related taxes from noncompliant companies domestically rather than allowing payments to the EU.

Although the policy has been under review for some time, the source said concerns over inflation and industrial costs have delayed its rollout. However, Egypt’s 2025-2030 Tax Policy Document, now in the final stages of review, already references the possible introduction of a carbon tax once EU requirements take effect. The EU’s carbon mechanism currently covers six commodities — four of which are major Egyptian exports. Once Brussels finalizes its implementation timeline, Cairo is expected to begin its own preparations for domestic adoption.

Your top green economy stories for the week:

  • Acwa Power is planning to manufacture water desalination components and establish desalination plants in partnership with the government, CEO Marco Arcelli said during a meeting with Prime Minister Moustafa Madbouly.
  • Arab Contractors subsidiary Nahdet Misr plans to build a USD 100 mn waste-to-energy plant in Qalyubia, which will generate 62 MW of power per hour. The facility will process 2k tons of waste daily and is set to be completed within three years in partnership with local and international firms.
Tags: