Navigating Carbon Border Adjustments: A Case Study Analyzing the Impacts and Strategies for Trinidad and Tobago’s Ammonia Exports

The introduction of the European Union’s (EU’s) Carbon Border Adjustment Mechanism (CBAM) significantly impacts carbon-intensive export sectors in economies of Small Island Developing States, particularly Trinidad and Tobago’s (T&T’s) ammonia industry. This study evaluates the economic implications of CBAM on T&T’s ammonia exports using historical production, natural gas consumption, and trade data (2004–2024) to establish emission baselines and projections for up to 2034. By employing linear programming optimization and sensitivity analyses, this study quantifies CBAM’s potential revenue impacts of CBAM under various emission factors, carbon prices, and market scenarios. The results indicate that under a business-as-usual (BAU) scenario, T&T’s ammonia exports to the EU could face an average CBAM tax burden of 22%, significantly affecting export revenue and economic stability. Notably, reducing emission factors by 37%–75% through mitigation technologies like carbon capture and storage could almost entirely negate these costs in the near term. The findings highlight critical vulnerabilities in the T&T’s ammonia sector due to CBAM, but also highlight strategic decarbonization pathways. The analysis advocates urgent policy interventions, including emission reduction investments, export market diversification, and domestic carbon pricing strategies, to maintain economic resilience and competitiveness in a global economy, increasingly governed by stringent climate-related trade measures. This study uses T&T’s ammonia sector as a case study and provides a methodological framework for adapting this work to other CBAM-exposed sectors locally and carbon-intensive economies globally.