Carbon Border Adjustment Mechanism (CBAM)

The Carbon Border Adjustment Mechanism (CBAM) is a tool introduced by the European Union to prevent "carbon leakage." It applies to imports of certain goods to ensure that imported products bear the same carbon costs as those produced within the EU. This aims to create fair competition and incentives for global decarbonization.

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CBAM was introduced as part of the "European Green Deal" and the "Fit for 55" package, with the goal of making Europe climate-neutral by 2050. The mechanism aims to counteract the phenomenon of "carbon leakage," where companies relocate production to countries with less stringent climate regulations to save costs. Since October 2023, a transitional phase has begun, requiring importers to report the CO₂ emissions of imported products. Starting in 2026, importers will need to purchase certificates to cover the CO₂ emissions of these products, with certificate prices aligned with the European Emissions Trading System (ETS).

CBAM primarily applies to energy-intensive sectors such as iron and steel, aluminum, hydrogen, fertilizers, electricity, and cement. This mechanism is highly significant for industrial companies, especially in energy-intensive sectors, as they face the challenge of adapting their supply chains and production processes to meet CBAM requirements, particularly if they export to the EU.