The European Union’s Carbon Border Adjustment Mechanism (CBAM) imposes carbon tariffs on imports based on the carbon emissions embedded in their production, ensuring costs align with EU environmental standards. It targets high-emission sectors such as steel, cement, fertilizers, aluminum, electricity, and hydrogen.
It aims to level the playing field by applying the same carbon costs to imports as EU-produced goods to reduce carbon leakage and drive global decarbonization.
CBAM is being implemented in phases, started with a transitional period (October 1, 2023 – December 31, 2025), during which importers in covered sectors must report embedded emissions but face no financial obligations, focusing instead on data collection to prepare for full implementation.
From January 1, 2026, CBAM will require importers to purchase certificates reflecting the emissions in their goods, with prices linked to the EU Emissions Trading System (EU ETS), allowing deductions for carbon prices paid in the country of origin.
By 2030 and beyond, CBAM is expected to expand to cover all sectors under the EU ETS, accompanied by a phased reduction of free allowances, promoting global decarbonization and preventing carbon leakage.
Industries must monitor these developments closely, as CBAM’s phased approach will impact sectors differently based on their emissions profiles and timelines.
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