About Carbon Border Adjustment Mechanism (CBAM):
- What is it? It is a proposed European Union (EU) tariff on carbon intensive products.
- Purpose: To put a fair price on the carbon emitted during the production of carbon intensive goods that are entering the EU , and to encourage cleaner industrial production in non-EU countries.
- The CBAM will ensure the carbon price of imports is equivalent to the carbon price of domestic production.
- If implemented as planned, EU importers will have to buy carbon certificatescorresponding to the carbon price that would have been paid in the EU, if the goods had been produced locally.
- The price of the certificates would be calculated according to the auction prices in the EU carbon credit market.
- The amount of certificates required would be defined yearly by the quantity of goods and the embedded emissions in those goods imported into the EU.
- Companies in countries with a domestic carbon pricing regime equivalent to the EU’s will be able to export to the EU without buying CBAM certificates.
- CBAM will initially cover several specific products in some of the most carbon-intensive sectors at risk of "carbon leakage": iron and steel (including some downstream products such as nuts and bolts), cement, fertilizers, aluminium, electricity and hydrogen.
