Governance & Policy
Trade-Exposed Industry
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.
References
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This reference provides supporting context for how “Trade-Exposed Industry” is defined and used.
Overview
How it is used
The category structures ETS free allocation lists, CBAM sector scope, Australia's Safeguard Mechanism baselines, and industry transition deal negotiations.
Why it matters
Trade-exposed industries are where climate ambition meets WTO law and jobs; how policy treats them decides whether deep industry decarbonisation happens at home or not at all.