The EU Carbon Border Adjustment Mechanism (CBAM)
The CBAM is a landmark tool to put a fair price on the carbon emitted during the production of carbon intensive goods that are entering the EU. It will ensure that the carbon price of imports is equivalent to the carbon price of domestic production, and that the EU’s climate objectives are not undermined.
The CBAM will enter into force in its transitional phase on 1 October 2023, and will fully apply from 1 January 2026.
- 16 May 2023: CBAM regulation enters into force
- 1 October 2023: CBAM transitional phase begins
- 31 January 2024: First reporting period for importers ends
- 1 January 2026: CBAM permanent system enters into force
Why is the CBAM important?
The CBAM will help to level the playing field for EU businesses and protect the EU’s climate objectives. It will also encourage cleaner industrial production in non-EU countries. The CBAM is designed to be compatible with the World Trade Organization (WTO) rules.
The CBAM is a carbon pricing system for imported goods. It will work by requiring EU importers to buy carbon certificates corresponding to the carbon price that would have been paid if the goods were produced in the EU.
In a transitional phase starting on October 2023, importers will have to report emissions embedded in their goods without paying a financial adjustment. The CBAM will initially apply to imports of the following goods:
- Iron and steel
These sectors have a high risk of carbon leakage and high carbon emissions. The product scope may be extended by 2030 to encompass all products covered by the EU ETS.