CBAM Starts To Apply

The EU's ambitious and innovative Carbon Border Adjustment Mechanism ("CBAM") was finally adopted as part of a package of other "Fit for 55" climate actions on 10 May 2023. A first Implementing Regulation of over 100 pages was adopted on 17 August 2023 together with over 350 pages of initial guidance.

CBAM is an ingenious mechanism designed to counter "carbon leakage" arsing from the fact that the EU's emission trading scheme ("ETS") creates an incentive for emission-intensive production to move outside the EU. It comes replete with complex mechanisms designed to counter allegations of protectionism and is introduced gradually so as to allow calibration and minimise opposition.