The EU introduces the Carbon Border Adjustment Mechanism to help achieve climate neutrality
To reach the EU’s goal of becoming the first climate-neutral continent, the economy must transform and adapt.
The European Commission’s EU Green Deal presents a plan to make the economy more sustainable by turning environmental challenges into opportunities. Considering this, the industrial sector must aim for clean production, more efficient use of materials and enhanced recycling.
Part of the Green Deal is the introduction of a new Carbon Border Adjustment Mechanism (CBAM). Due to less strict climate policies in non-EU countries, there is a greater risk of ‘carbon leakage’. This means that companies based in the EU could move carbon-intensive production abroad to take advantage of lower standards. Carbon leakage can therefore limit efforts to fight climate change.
The new CBAM will put a price on carbon use in emission-heavy imports and will therefore help to reduce emissions.
The CBAM will initially only apply to the following goods:
Iron and steel
A gradual approach will provide more stability for businesses.
Speaking of the new policy, Markus J. Beyrer, Director General of BusinessEurope said: "The European business community stands behind the Green Deal and believes it will be most effective if Europe takes an all-inclusive approach to its trade and climate agenda. In addition to carbon border adjustments, Europe has many other options to improve global climate action through its trade policy."
Carbon border adjustment is not about protectionism, but about ensuring a level-playing field and international cooperation to reach climate goals.
The CBAM will also equalise the price of carbon between domestic products and imports and ensure that the EU's climate objectives are not undermined by production relocating to countries with less ambitious policies.
You can read more about Carbon Adjustment here, and find the European Commission’s report on the mechanism attached at the bottom of this page.