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
- ensure that the EU's climate objectives are not undermined.
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