The EU Carbon Border Adjustment Mechanism – Implications For India

Authors - Tetyana Payosova, Joanna Redelbach* and Sanjay Notani**

On 14 July 2021, the European Commission (Commission) published its proposal for a regulation establishing a carbon border adjustment mechanism (CBAM).¹ The core element of the CBAM is the obligation to pay for the greenhouse gas (GHG) emissions embedded in certain carbon-intensive products imported into the European Union (EU) through the purchase of so-called CBAM certificates.

The CBAM is conceived as a measure against the risk of carbon leakage, a phenomenon whereby companies move their production abroad to avoid the costs of complying with stringent environmental standards domestically or import cheaper foreign products that were not subject to a carbon price in their country of production. The European Union fears that its increased climate ambitions and the rapidly increasing price of carbon under its domestic emissions trading scheme, having reached nearly 90 EUR/tonne CO2 in