The CBAM addresses ‘carbon leakage’ where carbon-intensive products are made outside the EU in countries with inferior climate policy standards, and where those products are made available to the EU market – thus undermining the EU’s emission reduction efforts. Broadly, the mechanism is designed to ensure the carbon price of imported goods is equivalent to the carbon price of goods produced in the EU.
The scheme is being introduced on a transitional basis from 1 October 2023 (as a reporting obligation only) and will then be phased in on a permanent basis from 2026 until 2034 (matching the timetable for the phasing out of allowances under the existing emissions trading scheme). Heavy industry sectors where production is particularly carbon intensive and most at risk of carbon leakage will be included in the first part of the rollout (e.g. cement, iron, steel, fertilisers, electricity).
Although the CBAM is effectively a carbon tax, it was passed as an environmental measure by qualified majority. Had it been proposed as a tax measure (requiring unanimous agreement) it would have failed, with Poland voting against it.
The CBAM addresses ‘carbon leakage’ where carbon-intensive products are made outside the EU in countries with inferior climate policy standards, and where those products are made available to the EU market – thus undermining the EU’s emission reduction efforts. Broadly, the mechanism is designed to ensure the carbon price of imported goods is equivalent to the carbon price of goods produced in the EU.
The scheme is being introduced on a transitional basis from 1 October 2023 (as a reporting obligation only) and will then be phased in on a permanent basis from 2026 until 2034 (matching the timetable for the phasing out of allowances under the existing emissions trading scheme). Heavy industry sectors where production is particularly carbon intensive and most at risk of carbon leakage will be included in the first part of the rollout (e.g. cement, iron, steel, fertilisers, electricity).
Although the CBAM is effectively a carbon tax, it was passed as an environmental measure by qualified majority. Had it been proposed as a tax measure (requiring unanimous agreement) it would have failed, with Poland voting against it.
