CBAM (Carbon Border Adjustment Mechanism)

The Carbon Border Adjustment Mechanism (CBAM) is a climate policy tool developed by the European Union to address carbon leakage and encourage global decarbonization. It aims to level the playing field between EU producers subject to stringent climate regulations and non-EU importers by imposing a carbon price on certain imported goods. CBAM initially covers carbon-intensive sectors such as cement, iron and steel, aluminum, fertilizers, electricity, and hydrogen. The mechanism is being phased in gradually, with a transitional reporting period from 2023 to 2025, followed by full implementation from 2026. During the definitive phase, importers will need to purchase CBAM certificates corresponding to the embedded emissions in their imports. CBAM is designed to complement the EU Emissions Trading System (EU ETS) and support the EU's climate objectives while encouraging international partners to adopt similar carbon pricing measures.