The Highest Tariff, the Smallest Line

The Central Bank of Trinidad and Tobago published Working Paper WP03/2026 on 7 September. It asks what the European Union's Carbon Border Adjustment Mechanism would do to Trinidad and Tobago's exports, and it answers with two numbers that appear to disagree. The first is 40.8 per cent. That is the implied import tariff the paper reports for Trinidad and Tobago at a carbon price of US$50 a tonne of carbon dioxide, and it is the highest figure in the paper's cross-country comparison. The second is the aggregate result. Real GDP falls by less than 1 per cent under both of the scenarios the authors run. Total exports go from US$13,314 million to US$13,306 million, imports fall by US$5 million, and the current account balance moves by US$3 million. A country carrying the steepest carbon border tariff in the table loses three million dollars. Both readings come out of the same simulation, published on the same day by the same three authors. The gap between them is the story.

The table that number comes from has four rows, and 40.8 sits in one cell of one of them. Table 3 splits the implied tariff by sector. On refined petroleum products Trinidad and Tobago carries 40.80 per cent against 1.01 for the United States, 1.07 for the rest of the Caribbean, 1.17 for China, 0.94 for Latin America and 1.38 for the rest of the world. On the other three rows the country is unremarkable or better placed than its peers. The CBAM-covered sectors themselves come to 1.33 per cent, mid-table and below China at 1.83. Natural gas is 0.31 per cent, the lowest of any region shown, against 5.21 for China and 3.97 for Latin America. Crude oil is 0.01 per cent, the smallest number in the table. Refined petroleum products are also the smallest thing the country sells. Table 5 puts them at US$139 million before the shock, against total exports of US$13,314 million, which is a fraction over one per cent. The highest carbon border tariff in the paper lands on that line, and takes US$6 million off it.

The lines that carry the export book move by less than that. Energy-intensive industries, which is the ammonia, methanol and fertiliser complex, stand at US$4,562 million and lose US$7 million. Natural gas stands at US$4,532 million and gains US$2 million, because the model shifts resources towards the sector the mechanism barely touches. That is trade diversion doing the work, and the authors are careful about it. They record that the standard substitution assumptions in the model may overstate how much redirection is realistically achievable in a hydrocarbon sector built on long-term contracts and fixed infrastructure. The exposure figures are the ones that survive if the assumptions do not. Table 1 puts CBAM-covered exports to the EU at US$434.9 million in 2024, which is 33.9 per cent of everything Trinidad and Tobago sent to the EU and 5.5 per cent of its total exports. That share has never been stable. It was 0.9 per cent in 2012 and 9.7 per cent in 2022. The paper reports the IMF's estimate that exposure passes 10 per cent if coverage extends to petroleum products and petrochemicals including methanol, and that the payments European importers would face could reach about US$189 million, close to 46 per cent of fertiliser exports to the EU.

What the paper measures is a trade effect. The fiscal effect is the one that decides anything in Port of Spain. By the paper's own accounting, the energy sector supplied 34.7 per cent of central government revenue and 77.7 per cent of merchandise exports over the years 2012 to 2024. The Caribbean Debt Tracker carries Trinidad and Tobago at 67.8 per cent of GDP on central government debt for FY2026, with a central government primary deficit of 0.8 per cent, so there is not much room to absorb a revenue shock before a carbon price arrives at all. The paper's recommendation is a domestic carbon tax, and the Bank has already put a number on that. Working Paper WP01/2026, published in March, modelled one using the IMF and World Bank carbon policy assessment tool and found additional fiscal revenue of US$5.34 billion over the ten years from 2026 to 2035, US$3.58 billion of it from natural gas. Set that against the US$189 million the European mechanism would collect from its own importers at the upper bound. Trinidad and Tobago's carbon is going to be priced by somebody. The open question is which treasury books the money, and a levy collected at the European border is not revenue Port of Spain can spend.