CBAM Definition: Carbon Border Adjustment Mechanism

CBAM was introduced as part of the "European Green Deal" and the "Fit for 55" package, with the goal of making Europe climate-neutral by 2050. The mechanism aims to counteract the phenomenon of "carbon leakage," where companies relocate production to countries with less stringent climate regulations to save costs. Since October 2023, a transitional phase has begun, requiring importers to report the CO₂ emissions of imported products. Starting in 2026, importers will need to purchase certificates to cover the CO₂ emissions of these products, with certificate prices aligned with the European Emissions Trading System (ETS).

CBAM primarily applies to energy-intensive sectors such as iron and steel, aluminum, hydrogen, fertilizers, electricity, and cement. This mechanism is highly significant for industrial companies, especially in energy-intensive sectors, as they face the challenge of adapting their supply chains and production processes to meet CBAM requirements, particularly if they export to the EU.