A green edge to global growth
As climate and trade policy become more intertwined, countries stand to benefit if they can produce industrial products in the most climate-friendly way possible.
Consider Mozambique and aluminum. The country, home to the second largest smelter in Africa, ships more than 98% of its output abroad—mostly to Europe.
Aluminum production is generally dirty. Extracting the light, silvery metal from raw aluminum oxide requires smelting; the unavoidable chemical reaction releases carbon dioxide. Yet a large share of the total carbon emissions in aluminum production comes from the vast amounts of electricity required to power smelters. In regions where electricity is made with coal or other fossil fuels, production ranks among the most carbon-intensive industrial activities on the planet. But when powered by low-carbon energy sources—such as hydropower—the same process can yield a far cleaner product.
This is where Mozambique stands out. Thanks to its hydropower resources, the country's aluminum production is much greener than average.
Advantage green
Some countries charge domestic industries for their greenhouse gas emissions. Typically implemented through a carbon tax or a cap-and-trade system, this fee makes emitters pay for the damage their emissions cause, thereby incentivizing a smaller carbon footprint.
Now countries are beginning to introduce a policy tool known as a border carbon adjustment. The idea is to ensure that imported goods are subject to those same carbon fees. In effect, it levels the playing field, discouraging industries from relocating to regions with weaker climate rules—a phenomenon known as carbon leakage.
The European Union's forthcoming Carbon Border Adjustment Mechanism (CBAM) is the most advanced example of such a policy, though other countries, like the UK and Australia, may be considering their own. Beginning in 2026, the EU CBAM will cover key heavy industries where emissions and global trade are significant. Imports into the EU will face a carbon adjustment fee except when the goods were already subject to a carbon price in the country of production.
Here's where Mozambique stands to gain. Because Mozambique's aluminum is produced with relatively low carbon emissions, it could become more cost-competitive than other aluminum exporters to the EU. The country could unlock even greater benefits from the EU CBAM by introducing its own domestic carbon price—allowing Mozambique to retain the resulting revenues rather than see them flow to the EU.
Even then, however, Mozambique faces an emerging patchwork of border adjustments and compliance standards as other countries and regions consider their own border carbon adjustments.
From fragmentation to coalition
A broader coalition of countries that agree on carbon pricing and trade rules could achieve far more than the EU CBAM alone, we argue in a report we recently authored in partnership with global experts: Building a Climate Coalition: Aligning Carbon Pricing, Trade, and Development. This coalition would encourage countries to produce, and sell, the products they can make in the cleanest way possible—and import from the cleanest producers.
Mozambique's comparative advantage would be rewarded in a carbon-pricing coalition that ensures countries that make aluminum in a more carbon-intensive way pay higher fees. At the same time, the introduction of a domestic carbon price would generate new fiscal resources for Mozambique to direct to its own development and climate goals.
The initial focus would be on the same industries covered by the EU CBAM (aluminum, steel, cement, and fertilizers), which account for more than 20% of global carbon emissions. More than 80% of emissions from these industries are already covered by carbon pricing, laying the foundation for a broader multilateral coalition.
By modeling potential coalition scenarios across those industries, we find that a climate coalition could deliver:
- Seven times more emissions reductions than current policies, equivalent to 650-770 million tons of CO₂ annually (about the same as Canada's total annual emissions);
- Nearly $200 billion in annual revenues, most generated through domestic carbon pricing;
- Limited economic disruption, with industrial output in coalition countries declining by less than 2%, and manageable price impacts.
Cooperation could achieve much greater climate returns without undermining a country's industrial competitiveness.
Low- and middle-income countries like Brazil, Indonesia, and India are projected to account for the largest share of global emissions this century. So, their participation is critical to any coalition's long-term effectiveness. To encourage them to join, coalition members could consider offering positive incentives like greater access to clean technologies through harmonized standards, lower tariffs, and joint ventures; concessional finance to support decarbonization; or technical assistance.
A landmark proposal for COP30
As nations meet this month in Belém for COP30—and with only months before the EU CBAM takes effect—host Brazil has put an Open Coalition for Carbon Market Integration, informed by our technical work, on the agenda.
For a country like Mozambique, it is an opportunity to become a partner in a global low-carbon economy, protecting its aluminum exports and raising funds. Meanwhile, for clean producers in Europe and beyond, a broader multilateral coalition built around carbon pricing offers a chance to expand markets for their low-carbon goods and strengthen the global incentive to decarbonize.
More information:
Global Climate Policy Project Working Group on Climate Coalitions. Building a Climate Coalition: Aligning Carbon Pricing, Trade, and Development. Cambridge, MA: Global Climate Policy Project at Harvard and MIT, 2025. salatainstitute.harvard.edu/bu … cpp-flagship-report/
Provided by Salata Institute at Harvard University
