Bangladesh’s apparel exports to the European Union (EU) could be hit with a carbon tax of around 5% after 2030 if emissions are not reduced, a new study warns.
The EU, Bangladesh’s largest export market, has introduced the Carbon Border Adjustment Mechanism (CBAM) to curb emissions across supply chains. Apparel products could be included in this mechanism by 2030. If current emission levels persist, Bangladesh’s garment exports may face an additional 4.8% carbon tax.
The findings come from joint research by Professor Mustafizur Rahman, distinguished fellow at the Centre for Policy Dialogue (CPD), and Mohammad Imraj Kabir. The report, published on 29 March, notes that this tax could coincide with Bangladesh losing its EU duty-free trade benefits after graduating from least developed country (LDC) status in November 2026. This could raise the total tariff on apparel exports to nearly 17%, combining the average EU import duty of 12% with the carbon tax.
Professor Rahman said the estimate is based on current carbon emissions in the country’s apparel sector.
Industry leaders, however, are optimistic. Mahmud Hasan Khan Babu, president of the Bangladesh Garment Manufacturers and Exporters Association (BGMEA), said many factories are already adopting renewable energy and green practices to meet EU requirements. Nearly 300 Bangladeshi factories are green-certified by the US Green Building Council (USGBC), though some still fall short of full EU compliance.
The report stresses that Bangladesh must increase clean energy use in production to avoid carbon taxes and recommends policy measures such as fiscal incentives for green technology, subsidised loans for environmental treatment plants, domestic carbon pricing, stronger renewable energy policies, and building technical capacity.
CBAM, introduced by the EU in July 2021, initially applies to cement, fertilizer, and steel from January 2026, with plans to expand to all imports, including apparel, by 2030. Given that apparel accounts for over 80% of Bangladesh’s exports and the EU takes more than half, the development is significant for the country’s economy.
