Bangladesh’s apparel exports to the European Union may have to abide by the carbon border adjustment mechanism (CBAM).

The EU has moved to impose the carbon tax initially in five sectors -- cement, iron and steel, aluminium, fertilizer and electricity -- from January 2023.Although Bangladesh’s major export items like apparel, leather and footwear are not included in the CBAM, these are among the 63 sub-sectors that are identified as sectors with a risk of carbon leakage and the EU might include these later on.

Bangladesh’s major competitors have either already established or are in the process of developing carbon markets locally. China launched its carbon market in 2021 while Vietnam and India are in the process of establishing their internal carbon market. Vietnam wants to formally launch its carbon market in 2028. So the CBAM can disproportionately affect Bangladesh relative to other countries. Though Bangladesh is one of the lower carbon emitters, there has been a sharp rise in emissions. With many green garment factories, Bangladesh has already taken a considerable stepe forward. However, several additional challenges like excessive water use, weak labour standards and inadequate waste management might continue to harm export prospects. Export firms have to ensure sustainable production practices.