The Carbon Border Adjustment Mechanism (CBAM)
A step towards sustainability
The Carbon Border Adjustment Mechanism (CBAM) is a promising step towards a more sustainable future and a fairer playing field for companies committed to the environment. This policy instrument is designed to reduce carbon emissions and prevent unfair competition between domestic companies subject to strict emissions regulations and foreign companies that are not.
What is the CBAM?
A transition period for the CBAM will run from October 2023 to December 2025. During this period, importers or their representatives must report quarterly on the amount of CO2 emitted during the production of the imported CBAM goods. No other obligations apply at this stage. This transitional period is explicitly intended to gain experience and learn. By acquiring knowledge and experience, all stakeholders can prepare effectively for the CBAM from 2026 onwards.
The CBAM, which entered into force in its transitional phase on 1 October 2023, taxes importers based on the carbon emissions associated with the production of goods imported from outside the EU. The aim of this levy is to discourage the import of high-carbon products whilst protecting domestic producers who may already face higher costs in order to comply with stricter environmental regulations.
The CBAM initially applies to imports of specific goods and raw materials, such as cement, iron and steel, aluminium, fertilisers, electricity and hydrogen, the production of which is carbon-intensive. This selection is based on the highest risk of carbon leakage. The first reporting period for importers ended on 31 January 2024.
Objective and impact
The aim of the CBAM is twofold: to strengthen environmental policy by encouraging global emissions reductions and to protect the competitive position of domestic companies that adhere to strict emissions standards. By encouraging importers to choose products with lower carbon emissions, the CBAM will accelerate the global transition to a low-carbon economy.
With its broad scope, the CBAM will ultimately capture more than 50% of emissions in the sectors covered by the European Union Emissions Trading System (EU ETS), confirming that it is a powerful tool in the fight against climate change and a demonstration of the EU’s commitment to a more sustainable future and a global low-carbon economy. The Carbon Border Adjustment Mechanism is more than just a policy instrument; it is a demonstration of the EU’s commitment to a more sustainable future and a powerful step towards a global low-carbon economy. With its impact on both the environment and the competitiveness of businesses, the CBAM promises a bright future for our planet and the economy.
