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.

Regulation (EU) 2023/956 establishing a carbon border adjustment mechanism, amended by Regulation (EU) 2025/2083 (CBAM)

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Regulation (EU) 2023/956 establishing a carbon border adjustment mechanism - Consolidated text

Passed/Approved

European Union

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An aim to achieve a quantifiable outcome within a given time-frame, set by an institution such as a national government.

Policy instruments are techniques or tools used by governing authorities to promote certain policies in order to achieve predetermined goals. Put simply, instruments are how a government tries to achieve its goals, with this taxonomy being focused on national policy instruments.

Risk is the potential for adverse consequences resulting from the dynamic interplay between (climate-related) hazards, exposure, and vulnerability of affected human or ecological systems.

Groups  of people who are adversely affected by climate change or the response to it

A set of principles, processes, and practices that build economic and political power to shift from an extractive economy to a regenerative economy.

Justice is the ethical and political framework that addresses fairness, including issues of responsibility, rights, and structural inequity.

Renewable energy means all forms of energy produced from renewable sources in a sustainable manner.

Fossil fuel is a generic term for non-renewable energy sources such as coal, fossil gas, and oil (including crude oil, and petroleum products), that can be used for electricity and heat generation. Fossil fuels are hydrocarbons formed from pressurised and heated organic material buried over millions of years.

Molecules in the atmosphere that play a key role in the greenhouse effect by trapping heat radiating from Earth’s surface.

Area of the economy in which actors engage in identical or related activities.

In human systems, the process of adjustment to actual or expected climate change and its effects, in order to moderate harm, increase resilience or exploit beneficial opportunities. In natural systems, the process of adjustment to actual climate change and its effects; human intervention may facilitate adjustment to expected climate change and its effects.

The management and allocation of funds, assets and investments to meet various objectives

Compulsory, required payments to the government that are levied more-or-less in proportion to the services provided. Fees and charges range from entrance fees to national parks, charges on land-based sewage discharge.

Tradable permits are market-based tools that grant permission for specific activities, frequently used to regulate emissions. These permits can be issued within a trading system to manage environmental impacts.

A target to reduce the prevalence of a greenhouse gas over a specific time frame

A commitment to balance GHG emissions with removal by a certain point in time, effectively reducing the net emissions to zero

Either money or something of monetary value is transferred between two or more organisations, people or countries.

Actions or measures to adapt freshwater systems to climate change.

Actions or measures to adapt freshwater, coastal and marine systems to climate change.

The release of heat-trapping gases, primarily from human activities such as burning fossil fuels, agriculture and industry.

A long-lived, colourless gas, chiefly emitted from fossil fuel combustion, deforestation and cement production.

Fossil gas, commonly known as natural gas, is a fossil fuel consisting chiefly of methane with smaller amounts of other hydrocarbons and trace gases, found in underground deposits.

Any compulsory, unrequited payment to the government levied on corporations or individuals. This can be for environmental reasons, such as introducing a Carbon tax to set a price that emitters must pay for the greenhouse gases they emit.

The activities of industries that transforms raw materials into finished goods through industrial processes.

The activities of industries involved in the production, distribution, and sale of energy, including electricity, gas, and renewables.

Activities that involve planning, designing and building infrastructure, residential, and commercial structures.

This sector involves the wholesale and retail selling of goods.

This sector involves activities to move goods and people, alongside the storage of products.

Activities of government agencies and institutions that provide public services, enforce laws and manage public resources.

This sector includes firms and individuals offering specialised expertise in fields such as law, accounting, consulting, science and engineering.

Activities of businesses and institutions that provide financial services and products to individuals and organisations.

the fair distribution of risks and opportunities of climate change and the transition to a regenerative economy, cognisant in particular of disproportionate impacts on vulnerable communities and the working class

Procedural justice means ensuring that decision making is safe, transparent and inclusive, emphasizing the agency and influence of vulnerable groups and those most impacted.

Any substance with chemical properties that can cause physical harm to people or damage the environment, including ammonia, carbon monoxide, phosphine, chlorine, arsenic, cadmium, mercury, pesticides, dioxins, microplastics, benzene, asbestos, aflatoxins, fluoride, methanol, and toxins from marine sources.

Slow onset events evolve gradually from incremental changes over many years or from increased frequency or intensity of recurring events. As defined in the Cancun Adaptation Framework (2010), slow onset events include risks and impacts from rising temperatures, desertification, biodiversity loss, land and forest degradation, glacial retreat, ocean acidification, sea level rise, and salinization.

Regulation (EU) 2023/956 establishing a carbon border adjustment mechanism - Consolidated text

Target

Policy instrument

Risk

Climate justice

Renewable energy

Fossil fuel

Greenhouse gas

Economic sector

Adaptation/resilience

Finance