Carbon Taxes – a Strange New Concept That Sends a Retired Old Man to… Google

Nearly five years into retirement, I thought I had finally hung up my sword.
Turns out, life wasn’t quite ready to let me go.

These days, I still find myself poking around my inbox every morning, replying to the usual questions about LC, SBLC, UCP, ISBP… Old habits die hard.

This morning, a friend working at the trade finance center of a major bank emailed me and asked:

“Hey, what exactly are carbon taxes? Will they have any impact on trade finance?”

That question stopped me in my tracks.

Carbon taxes? I had always thought that was something for environmental specialists — power plants, fuel prices, energy policy.
And now… trade finance?

Luckily, the night before, ICC Academy had sent out its latest update, featuring an article titled “Carbon border taxes become financial reality” by Dave Meynell.
Saved by the newsletter — otherwise, I would’ve looked pretty silly

So, What Are Carbon Taxes? Let’s Keep It Simple

In plain English:

The more CO₂ you emit, the more you pay.

A carbon tax is an environmental levy imposed on fossil fuels (coal, oil, gas), calculated based on the amount of CO₂ released when they’re burned.

For example:

• Carbon tax: USD 50 per ton of CO₂
• Factory emissions: 1,000 tons
  Carbon tax bill: USD 50,000

That cost doesn’t just disappear.
It quietly sneaks into:

• Electricity prices
• Fuel prices
• Airline tickets
• And… the price of goods

Why Trade Finance Can’t Look the Other Way

From 1 January 2026, the EU’s CBAM (Carbon Border Adjustment Mechanism) officially moves into the “pay real money” phase — no more reporting just for show.

Importers into the EU of carbon-intensive goods such as steel, aluminium, cement, fertilisers, and electricity must purchase carbon certificates corresponding to the embedded emissions in those goods.

CBAM has shifted from being an environmental compliance issue into:

• A cost issue
• A cash-flow issue
• A balance-sheet issue
  for both companies and banks

So Where Do Banks Get the Headache?

Let’s keep this short:

• Prices are no longer fixed
  The invoice says one thing; carbon costs show up later.
• Cash flows get shaved
  Receivables may be reduced by unexpected carbon charges.
• Documents start stepping into goods territory
  Banks are suddenly asking: “Can we trust these emissions figures?”

Which clashes head-on with the old golden rule:

Banks deal with documents, not goods.

CBAM blurs that line.

The Quick Takeaway

• Carbon taxes don’t hit non-EU banks directly
• But they pick their pockets through customers
• If you export to the EU, you can’t ignore this
• If you finance those exports, you really can’t

I thought retirement meant peace and quiet…
Turns out carbon taxes have dragged me back into the trade finance jungle

___

— Mr. Old Man