The European Union's Carbon Border Adjustment Mechanism (CBAM) represents a landmark shift in climate policy for industrial emissions, creating new financial obligations and strategic imperatives for countries exporting emissions-intensive goods to the EU, as it phases out financial support in the form of free allocation to producers in the EU. This paper refines and extends the World Bank's CBAM Exposure Index framework to estimate the exposure, costs, and policy options facing 176 countries and territories across four main covered sectors: cement, steel, aluminum, and fertilizers. We introduce a suite of indicators — including total certificate costs, trade intensity metrics, and competitiveness measures — and systematically compare results across two data sources, contrasting value-based emission intensities drawn from input-output data with mass-based EU Commission default values. We show that the choice of methodology can substantially alter, and in some cases reverse, country-level findings, with important implications for how policymakers assess their sectors' competitive position.

Against this backdrop, the paper discusses practical opportunities for governments to help reduce their exporters' CBAM burden. By implementing qualifying carbon pricing mechanisms, exporting countries can retain revenues domestically that would otherwise be transferred to the EU, while also building the clean competitiveness needed to thrive in a decarbonizing global economy. Monitoring, Reporting, Verification, and Accreditation (MRVA) systems will play a critical role, by allowing exporters to demonstrate actual emission intensities below EU default values— and thereby reduce their CBAM liability—and by facilitating the design and enforcement of domestic climate policies. Supporting such policy responses with climate finance and technical assistance in developing countries can ensure that CBAM, while a source of near-term disruption, can serve as a catalyst for accelerating industrial decarbonization and strengthening long-run competitiveness in third countries.