The EU’s Carbon Border Adjustment Mechanism (CBAM) allows for a price to be put on the carbon emitted during the production of carbon intensive goods that are entering the EU, and to encourage cleaner industrial production in non-EU countries. The gradual introduction of the CBAM from October 2023 is aligned with the phase-out of the allocation of free allowances under the EU Emissions Trading System (ETS) to support the decarbonisation of EU industry.
The CBAM will initially apply to imports of certain goods and selected precursors whose production is carbon intensive and at most significant risk of carbon leakage: cement, iron and steel, aluminium, fertilisers, electricity and hydrogen. CBAM will eventually – when fully phased in – capture more than 50% of the emissions in EU ETS covered sectors.
By confirming that a price has been paid for the embedded carbon emissions generated in the production of certain goods imported into the EU, the CBAM is intended to ensure the carbon price of imports is equivalent to the carbon price of domestic production, and that the EU's climate objectives are not undermined.
