The EU’s Carbon Border Adjustment Mechanism (CBAM) addresses carbon leakage by ensuring that imported goods face the same carbon costs as those produced in the EU. This initiative promotes cleaner industrial practices globally and supports the EU’s climate objectives.

Key features:

• Implementation phases:
  • Transitional phase (2023-2025):started on 1 October 2023, requiring importers to report carbon emissions embedded in their goods without financial obligations.
  • Definitive regime (from 2026):importers will purchase CBAM certificates corresponding to the carbon emissions of their imports.
• Scope: covers imports of cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen – sectors at high risk of carbon leakage.
• Mechanism:
  • Importers must declare carbon emissions embedded in their goods.
  • CBAM certificates will be purchased, with prices linked to the EU Emissions Trading System (ETS).
  • Carbon prices paid in the country of origin can be deducted from CBAM liabilities.

CBAM is aligned with World Trade Organisation (WTO) rules and EU climate policies, including the phase-out of free allowances under the EU ETS. By levelling the playing field, CBAM incentivises global industries to adopt greener technologies, contributing to the fight against climate change.