Carbon Border Adjustment Mechanism (CBAM)

The CBAM is the EU's mechanism to prevent "carbon leakage" — the phenomenon where EU industries shift production to countries with weaker climate regulations. Under CBAM, EU importers must purchase certificates corresponding to the embedded CO2 emissions in imported goods, priced at rates aligned with the EU Emissions Trading System (EU ETS), currently around EUR 70-100 per tonne of CO2. The mechanism applies to six carbon-intensive sectors: cement, iron and steel, aluminium, fertilisers, electricity, and hydrogen.