Understanding The Carbon Border Adjustment Mechanism (CBAM): Scope, Timeline And Possible Simplification

What is the CBAM ?

The Carbon Border Adjustment Mechanism (CBAM), introduced by EU Regulation 2023/956, is the first mechanism of its kind that aims to decarbonize the most energy-intensive sectors, while also addressing the risk of carbon leakage. The latter concerns the relocation of production to third countries with weaker environmental standards

In essence, CBAM seeks to prevent an increase in carbon emissions generated outside the EU's borders, but which are intrinsically linked to consumption and trade flows in the EU. The aim is to put a fair price on the carbon emitted during the production of carbon intensive goods, and to encourage cleaner industrial production. The so-called CBAM goods include cement, electricity, fertilisers, aluminium, iron, steel, and hydrogen. Importers of these goods will need to report the embedded emissions on these, which is basically all the carbon dioxide (CO₂) it took to make and deliver the products.