Carbon Border Adjustment Mechanism (CBAM)

The Carbon Border Adjustment Mechanism (CBAM) is a regulation implemented by the European Union to reduce greenhouse gas emissions within the EU. CBAM aims to price the carbon emissions from products imported into the EU. Purpose of CBAM: The main purpose of CBAM is to help the EU achieve its climate goals. By pricing the carbon emissions from imported products, CBAM aims to create a level playing field between EU manufacturers and third-country manufacturers and prevent "carbon leakage." Carbon Leakage: Carbon leakage refers to the shift of production activities from the EU to countries outside the EU due to stricter emission regulations, resulting in increased emissions outside the EU. CBAM aims to prevent this shift by pricing the carbon emissions from imported products into the EU. Implementation of CBAM: CBAM came into effect on October 1, 2023. In its first phase, CBAM covers only specific sectors. These sectors include: Iron and Steel, Aluminium, Cement, Fertilizers, Electricity. How CBAM Works: CBAM operates based on emissions declared and verified by importers. Importers are required to purchase a certain number of carbon certificates annually for the products they import. The price of carbon certificates is determined in the emissions market. Impact of CBAM: CBAM is expected to make a significant contribution to the EU's achievement of its climate goals. By reducing the carbon emissions from imported products, CBAM will help the EU reach its target of reducing greenhouse gas emissions by 55% by 2030. Resources for CBAM: European Commission Carbon Border Adjustment Mechanism website: https://customs-taxation.learning.europa.eu/ Detailed Information about CBAM: The scope of CBAM may be expanded over time. The impact of CBAM on third countries could be significant. Various technical and application details of CBAM are still being developed. CBAM is an important component of the EU's climate policy. The implementation of CBAM will play a crucial role in helping the EU achieve its climate goals and prevent carbon leakage.