Cambodian Exports to the EU: What is CBAM and How It Works
The CBAM, adopted in May 2023, is a regulatory tool under the EU Green Deal meant to prevent “carbon leakage” (i.e., companies relocating emissions-intensive production outside the EU to avoid strict emissions rules).
Under CBAM, imports into the EU of certain carbon-intensive goods (such as steel, aluminium, cement, fertilisers, electricity, and hydrogen) will have to declare the embedded carbon emissions of their production. Initially (during a transitional phase until end-2025), importers must report emissions but will not pay CBAM levies; starting in 2026, CBAM compliance will involve purchasing “CBAM certificates” equivalent to the EU ETS (Emissions Trading System) carbon price for the emissions associated with the imported goods. If exporters or producers can show they have already paid an equivalent carbon price or have lower emissions, they may get credits offsetting the cost. KPMG+2Wikipedia+2
Cambodia-EU Trade: What’s at Stake
Cambodia is a small export partner for the EU, but with significant exposure: in 2024, about 70% of Cambodia’s exports to the EU were textiles, travel goods and apparel. These goods are not currently in CBAM’s first wave of covered sectors. Trade and Economic Security
Since CBAM currently applies only to specific heavy industries (steel, aluminum, cement, fertilisers, electricity, hydrogen), many of Cambodia’s major exports to the EU are not yet covered. However, CBAM is expected to expand over time → the EU has signaled that in future revisions, more downstream sectors and possibly other emission-intensive product types may be included. KPMG+2agriculture.gouv.fr+2
Possible Impacts on Cambodian Exports
Limited direct effects (initially)
Since CBAM’s initial scope excludes the textile/apparel sectors, Cambodia’s largest export category to the EU, the immediate financial cost or CBAM tariff for the bulk of exports is likely low – for now.-
Potential risk if the scope expands
Suppose the EU later includes downstream sectors (e.g. textile inputs, dyeing, processing) or more agricultural or manufactured goods with high emissions in their supply chain. In that case, Cambodian exporters may face additional reporting burdens, possibly higher costs. For example, dyeing of fabrics can involve energy costs and carbon emissions (if from fossil sources); if that becomes covered, there may be risk. -
Compliance & verification challenges
To get the benefit of any deductions (for carbon price already paid, or for lowered carbon emissions), exporters will need robust documentation of GHG emissions in their production chain, possibly audited or verified. For many factories in Cambodia, this may mean investment in measurement, monitoring, reporting and verification (MRV) systems, cleaner energy sources, or energy efficiency upgrades. These may impose upfront cost burdens. -
Competitive pressure
Cambodian exporters may be at a disadvantage compared to producers in countries with lower emissions per unit or more established clean-energy infrastructure. The CBAM might force them to adopt greener production or pay higher implicit carbon costs to maintain competitiveness in the EU. -
Opportunity for differentiation
On the plus side, exporters who are early adopters of cleaner, greener production methods might gain competitive advantage. Marketing that emphasizes lower carbon footprint could become more valuable. Also, there may be international aid / development funds or private sector partnerships that help with decarbonization investments.
What Cambodian Government & Businesses Can Do
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Assess the emissions footprint of major export industries, especially textile/apparel and agriculture, even for energy-use or inputs that are not currently covered.
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Invest in cleaner energy (solar, renewable), energy efficiency, better equipment and infrastructure to reduce emissions, particularly electricity use, which is often a major component of embedded emissions.
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Set up or improve MRV systems: measurement, reporting and independent verification to document carbon emissions in production and supply chain.
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Engage with EU importers to ensure documentation meets CBAM requirements and explore whether cost-sharing or collaboration is possible.
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Explore financial incentive programs or grants, potentially from international climate finance, donor agencies, or development banks to support decarbonization.
Conclusion
While CBAM will not immediately hit Cambodia’s major exports (textiles, apparel) directly under the current covered sectors, it introduces shifting trade rules that export-oriented industries cannot ignore. Over time, as the scope expands and carbon reporting becomes more rigorously enforced, Cambodian exporters will need to adapt: both technically (lowering emissions) and organizationally (building verifiable emissions data). Those who move early may find themselves at an advantage; those who delay may face cost, risk and loss of competitiveness in the EU market.
CBAM isn’t just a tax—it’s a nudge: toward more sustainable, transparent production—and for Cambodia, it may be both challenge and opportunity.
Sources: https://oneclicklca.com/en/resources/articles/european-carbon-border-adjustment-mechanism
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