# Embodied energy trade: Geopolitics and regulation How border carbon charges now decide which products travel Source page: https://www.materialinsights.org/energy/e_embodied/geopolitics/ What this tab covers Political and regulatory forces that help (tailwinds) or hinder (headwinds) this way of moving energy, dated. Embodied energy trade lets energy-rich countries export value instead of fuel, but carbon pricing at borders and energy security policy now decide which products travel. #### Tailwinds **Green iron as industrial strategy** 2025 Agora Industry estimates that importing green hot briquetted iron could cut overall steel production costs in Germany by 12 to 15% in 2040, from iron-ore- and renewables-rich exporters.^[11](https://ariadneprojekt.de/media/2025/12/7_Choksey_AgoraIndustry.pdf) **Hydrogen embodied in products** 2022 IRENA expects almost three-quarters of hydrogen to be used as methanol, steel or ammonia, which are easier to ship than hydrogen itself.^[8](https://www.irena.org/Energy-Transition/Technology/Hydrogen/Global-hydrogen-trade) **Nordic data centre pull** 2025 Cold climate, near all-hydro power in Norway, tax relief and fast permitting have drawn atNorth, AWS and Microsoft to Sweden, and Google, Microsoft and TikTok to Finland.^[17](https://www.atnorth.com/in-the-news/nordic-incentives-keep-data-center-costs-competitive/) #### Headwinds **EU CBAM definitive period** 2026 From 1 January 2026 the EU Carbon Border Adjustment Mechanism moved from reporting to its definitive regime: importers of cement, iron and steel, aluminium, fertilisers, electricity and hydrogen must surrender CBAM certificates each year for the embodied emissions, priced from EU ETS auctions, with a de minimis exemption of 50 tonnes a year per importer (not for hydrogen and electricity). The mechanism reaches full effect in 2034. It rewards low-carbon embodied energy and penalises coal-based metal.^[23](https://trade.ec.europa.eu/access-to-markets/en/news/start-definitive-period-cbam-eu)^[24](https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism/cbam-definitive-regime_en) **Coal-based smelting** 2024 The aluminium sector emitted about 1.11 Gt CO2e in 2022 (about 15.1 t CO2e per tonne of primary metal), and coal plants supplied about 72% of China's smelting capacity in 2023.^[1](https://think.ing.com/articles/green-aluminium-bundle-understanding-aluminiums-emissions) **Policy uncertainty for data centres** 2025 Finland's March 2025 removal of preferential electricity tax rates added uncertainty; the IEA flags grid bottlenecks as a key risk to data centre growth.^[17](https://www.atnorth.com/in-the-news/nordic-incentives-keep-data-center-costs-competitive/)^[14](https://www.iea.org/reports/energy-and-ai/executive-summary) **Transport safety of iron** 2025 Direct reduced iron can re-oxidise with air or water, creating fire risk, which is why it is hot-briquetted before shipping.^[10](https://steelwatch.org/steelwatch-explainers/steelwatch-explainer-why-green-iron-trade-will-catalyse-steel-industry-decarbonisation/) The common pattern is that clean, cheap energy is becoming a source of comparative advantage for heavy industry, while border carbon rules such as CBAM make the embodied emissions, not just the energy, part of the trade price. #### Sources 1. [Green aluminium bundle: understanding aluminium's emissions (using IAI data)](https://think.ing.com/articles/green-aluminium-bundle-understanding-aluminiums-emissions) ING Think, 2024 2. [Global hydrogen trade](https://www.irena.org/Energy-Transition/Technology/Hydrogen/Global-hydrogen-trade) IRENA, 2022 3. [SteelWatch explainer: why green iron trade will catalyse steel industry decarbonisation](https://steelwatch.org/steelwatch-explainers/steelwatch-explainer-why-green-iron-trade-will-catalyse-steel-industry-decarbonisation/) SteelWatch, 2025 4. [Green iron trade: unlocking opportunities for Europe (presentation of September 2025 study)](https://ariadneprojekt.de/media/2025/12/7_Choksey_AgoraIndustry.pdf) Agora Industry, 2025 5. [Energy and AI: Executive summary](https://www.iea.org/reports/energy-and-ai/executive-summary) IEA, 2025 6. [Nordic incentives keep data center costs competitive (Techerati article reposted by atNorth; company-hosted)](https://www.atnorth.com/in-the-news/nordic-incentives-keep-data-center-costs-competitive/) atNorth / Techerati, 2025 7. [Start of the definitive period of the CBAM in the EU](https://trade.ec.europa.eu/access-to-markets/en/news/start-definitive-period-cbam-eu) European Commission, Access2Markets, 2026 8. [CBAM definitive regime](https://taxation-customs.ec.europa.eu/carbon-border-adjustment-mechanism/cbam-definitive-regime_en) European Commission, DG Taxation and Customs Union, 2026 ## Other sections - [Summary](https://www.materialinsights.org/energy/e_embodied/index.md) - [Overview](https://www.materialinsights.org/energy/e_embodied/overview/index.md) - [Correlation](https://www.materialinsights.org/energy/e_embodied/correlation/index.md) - [How it works](https://www.materialinsights.org/energy/e_embodied/explain/index.md) - [Efficiency and losses](https://www.materialinsights.org/energy/e_embodied/efficiency/index.md) - [Technology advances](https://www.materialinsights.org/energy/e_embodied/advances/index.md) - [Value chain](https://www.materialinsights.org/energy/e_embodied/valuechain/index.md) - [Unit economics](https://www.materialinsights.org/energy/e_embodied/economics/index.md) - [Impact on the biosphere](https://www.materialinsights.org/energy/e_embodied/biosphere/index.md) - [Relationships](https://www.materialinsights.org/energy/e_embodied/links/index.md)