EU Reaches Provisional Agreement On Carbon Border Adjustment Mechanism

Both the European Union (EU) and the U.S. have recently taken steps toward implementing some form of a carbon border adjustment mechanism (CBAM). Several countries and the EU have long considered enacting legislation that imposes a fee on carbon-intensive goods to reach their own climate goals while protecting domestic industry. Carbon border adjustment mechanisms seek to accomplish this goal by imposing a carbon fee on imports of certain products from countries without equivalent greenhouse gas (GHG) reduction mechanisms for the relevant product or sector. This week, the EU took a key step towards implementing a CBAM for EU member states that could apply to imports of certain products from the U.S. and other countries that have GHG reduction programs that are less stringent than those imposed within the EU, such as the EU Emissions Trading System (EU ETS).