Europe’s Carbon Border Rules: How Canada’s Clean Power Can Spark a Manufacturing Advantage
- Heidi Leslie
- Oct 9
- 2 min read
Europe’s new carbon border rules could turn Canada’s clean power into a manufacturing advantage.
When I wrote “Bits to the UK, Not Electrons to Ontario”, a couple of months ago, my argument was simple: it is less expensive and less contentious to build new fibre than it is to build new electric transmission. Canada’s clean electrons are an advantage and they can be turned into exportable data: we don’t need to sell electrons directly but can convert them to data processing, cloud services, and digital trade.
The same logic extends to the physical world. The next wave of Canadian energy isn’t just about data centres, it can also be about manufacturing powered by clean electricity. The electrons are the same; they’re just embodied in different exports.
Starting in January 2026, Europe’s Carbon Border Adjustment Mechanism (CBAM) will begin charging importers based on the carbon embedded in goods like steel, aluminum, cement, fertilizers, hydrogen, and electricity, effectively turning carbon content into a new tariff.
CBAM isn’t theoretical, it is already law. The EU’s reporting phase is underway, and by 2026 importers will start paying real carbon costs at the border.
In a system where carbon is priced at the border, supply chains powered by clean electricity and verifiable data suddenly have the have an advantage. That plays directly to Canada’s strengths.
Canada doesn’t usually think of itself as a manufacturing hub for Europe. But our power grids are among the cleanest in the world, and electricity here remains cheap compared to Europe. That gives Canadian manufacturers a built-in head start under CBAM if they can measure, verify, and communicate their carbon advantage.
Canadian sectors to watch include:
Low-carbon metals and components: Canadian aluminum, made on hydropower, already beats EU benchmarks. Green steel and hot-briquetted iron (HBI) could be next.
Electrical equipment and machinery: Clean grids make Canadian-made motors, switchgear, and transformers carbon-advantaged.
Chemicals and fertilizers: Canada can ship cleaner industrial and agricultural inputs into Europe’s decarbonizing sectors.
Sustainable forest products: Our certification systems already trace origin, a selling point under Europe’s new due-diligence rules. (Forest products are not covered by CBAM but are still worth noting as trade advantaged products due to other rules in Europe).
While North American trade politics seem to be drifting away from carbon accounting, Europe is creating the opposite: a regulated market where low-carbon manufacturing can win. For Canada with its clean power, stable governance, and credible verification systems, this could be a significant advantage.
We can keep exporting raw materials, or we can export low-carbon, value-added products built with clean electricity, transparent supply chains, and data credibility. The infrastructure is here, the policy signals are clear enough, and the timelines are short.
