Carbon Border Adjustment Mechanism (CBAM)


The European Union (EU) is implementing measures to reduce carbon emissions. However, some non-EU countries continue to operate with less stringent climate policies. Some EU companies may move their carbon-intensive production outside the EU to reduce costs. This will result in a risk of so-called ‘carbon leakage’.

The EU’s Carbon Border Adjustment Mechanism (CBAM) puts a fair price on the carbon emitted during the production of carbon intensive goods entering the EU. This will encourage cleaner industrial production in non-EU countries.

CBAM will be introduced in phases to: 

  • align with the phase-out of the allocation of free allowances under the EU Emissions Trading System (ETS) over the next eight years
  • ensure that the carbon price of imports is equivalent to the carbon price of domestic production
  • and
  • ensure that the EU's climate objectives are not undermined.

Next: The European Union's 'Fit for 55'