Canada has formally put the European Union’s Carbon Border Adjustment Mechanism (CBAM) among three priority trade disputes with Brussels, while discussions produced no agreement changing current obligations. A Canadian government document published on 30 October, after the EU–Canada summit in Montreal, identified the priorities.
At the summit, Canadian Prime Minister Mark Carney met European Commission President Ursula von der Leyen and European Council President António Costa. Canada also called for accelerated discussions on the EU Deforestation Regulation and proposed European pesticide measures. Its stated concern over CBAM is the carbon costs facing Canadian industrial exporters.
Both sides reported progress in addressing trade differences, but reached no specific agreement changing the carbon border mechanism. The European Union raised concerns over Canadian steel import quotas, taxes affecting certain electric vehicles and domestic procurement preferences.
The summit launched an Alliance for the Future to deepen cooperation in trade, industrial supply chains, critical minerals, energy, financial services and advanced technologies. EU–Canada trade in goods and services reached approximately €130 billion in 2025, according to the European Council, underscoring the commercial scale of the relationship as regulatory differences remain unresolved.
Carbon costs and CBAM evidence
The EU system is in its first definitive compliance year, requiring importers of covered goods to account for embedded emissions. The goods covered are steel, aluminium, cement, fertilisers, electricity and hydrogen. For Canadian metals producers, a central commercial question is whether carbon costs already incurred under domestic emissions-pricing arrangements can reduce the CBAM certificates their European customers must surrender.
Under Article 9 of the EU CBAM Regulation, carbon prices effectively paid on covered emissions in third countries may be recognised, taking account of rebates, compensation and other relevant adjustments. Having a domestic carbon-pricing system does not automatically determine the deduction available. Canada’s combination of federal and provincial industrial emissions-pricing arrangements complicates efforts to demonstrate actual carbon costs at individual production installations.
European importers need installation-level emissions information, evidence of qualifying carbon payments and documentation linking exported products to the relevant production and pricing arrangements. Importers, banks and industrial buyers also need to incorporate actual emissions, carbon-price deductions and CBAM certificate costs into supply contracts and financial forecasts.
For exporters from Serbia, Montenegro and the wider Western Balkans, the Canada discussions provide a negotiating precedent, but no new legal entitlement. Regional governments considering domestic carbon-pricing arrangements face the challenge of establishing payments eligible for recognition and supported by credible, independently verifiable evidence.
Canadian producers with lower verified emissions or larger eligible deductions could gain a cost advantage over more emissions-intensive competitors, although no competitive benefit can yet be attributed to the summit negotiations. The discussions have elevated CBAM within EU–Canada trade policy, while existing European compliance obligations remain in force.