Governance & Policy
Trade-Exposed Industry
Industries whose international competition prevents passing on carbon costs — the category carbon leakage policy is built around.
Definition
A trade-exposed industry is one that competes in international markets where it cannot freely pass carbon costs into prices — typically energy-intensive, trade-intensive sectors such as steel, cement, aluminium, chemicals, refining and fertilisers. Because rivals in jurisdictions without equivalent carbon pricing would undercut them, such industries face carbon leakage risk, and climate policy treats them specially: free allocation of EU ETS allowances historically, now being replaced by the Carbon Border Adjustment Mechanism's tariffs on embedded emissions of imports.
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