By imposing a carbon price on imports of particular goods, the European Union’s Carbon Border Adjustment Mechanism (CBAM) is set to change the dynamics of its international trade.
The goal of this policy is to stop “carbon leakage” by guaranteeing that EU and international producers pay the same carbon expenses. This phrase describes a situation where manufacturing might move to nations with laxer emission laws in order to get around severe EU standards. Exporters to the EU of iron and steel, aluminum, energy, fertilizers, cement, and hydrogen are required to disclose carbon emissions at every point in the supply chain starting on October 17, 2023.
The CBAM and the EU’s Emissions Trading System (ETS) will be completely linked by 2026. It is a cap-and-trade system, the ETS.
