The EU Carbon Border Adjustment Mechanism Enters Transitional Phase – Overview, Regional Relevance and Reactions
The Carbon Border Adjustment Mechanism (CBAM) is a regulatory measure adopted by the EU that is meant to complement and reinforce the existing car-bon pricing mechanism – EU Emissions Trading System (EU ETS) – and to sup-port the EU’s efforts to curb climate change by achieving carbon neutrality by 2050. In this context, CBAM was created to address the issue of ‘Carbon Leak-age’. This phenomenon occurs when companies based in the EU move their carbon-intensive production abroad into countries with less strict carbon pric-ing systems, or when EU products in the EU are substituted with imports from countries with less strict carbon pricing systems, as they might be more price-competitive due to the lack of a sophisticated carbon pricing scheme. There-fore, CBAM will ensure that imported goods from outside the EU are subject to a carbon price that is equivalent to the carbon price of production in the EU. For this purpose, once CBAM enters the definitive phase, it will be required to purchase CBAM Certificates for specific imported goods.
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