Canadian steel and aluminum exporters face EU carbon fees in 2027

Canadian exporters of iron, steel, and aluminum will face a new border charge from the European Union starting in 2027, according to internal government documents. The fees will apply despite Canada having a national carbon price and a long-standing trade agreement with the bloc.

Global Affairs Canada confirmed in a memo dated December 10, 2025, that the Carbon Border Adjustment Mechanism functions as a border charge. The document states that an exemption for Canada is not currently possible because the country’s carbon pricing system is not linked to the EU Emissions Trading System. In 2025, the EU carbon price stood at approximately $134 per tonne, while the Canadian price was $95 per tonne.

The federal government estimates that $2.8 billion worth of goods annually are exposed to the levy. The impact varies by province. Newfoundland and Labrador has about $885 million in annual iron and steel exports at risk, representing nearly half of its total in that sector. Quebec faces exposure of roughly $792 million for aluminum, iron, and steel exports. These figures are averages based on data from 2021 to 2024.

Ottawa is currently negotiating with Brussels during a summit in Montreal to minimize the financial burden on Canadian industry. Prime Minister Mark Carney described the summit as the start of negotiations to deepen strategic partnerships. Environment and Climate Change Minister Julie Dabrusin attended the event, where officials stated both sides are working to align their carbon baselines and processes.

Experts note the mechanism will ramp up gradually, reaching full implementation by 2034. Ross-Linden Fraser, acting director at the Canadian Climate Institute, called the change a major shift in how trade is treated. Aaron Cosbey, an economist at the International Institute for Sustainable Development, warned that compliance costs are already high for companies measuring emissions and undergoing verification.

By the time the tariff is fully in effect in 2034, Cosbey estimates Canadian steel could cost an additional $150 per tonne. He noted that this amount represents more than 10% of the current open market price for a tonne of steel. The government is seeking recognition of Canada's industrial carbon pricing system to reduce these costs.

Canada Nickel, a producer advancing a project in Timmins, Ontario, sees a potential advantage. CEO Mark Selby stated that the company's use of low-carbon electricity and carbon capture technology positions it well for the European market. Selby expects the long-run cost impact to be minimal, amounting to pennies per tonne for its exports.

Rio Tinto and ArcelorMittal did not comment on the findings. The internal memo also flagged that other nations, including the United Kingdom, Australia, Japan, and Turkey, are developing similar carbon border adjustments, suggesting the trend may spread beyond Europe.