The European Union (EU) plans to reduce its greenhouse gas emissions by 55% by 2030 and to achieve carbon neutrality by 2050. On 14 July 2021, the EU presented the FitFor55 package, a set of measures to achieve this goal. Among these proposals, the Carbon Border Adjustment Mechanism (CBAM) targets the decarbonisation of industry by ensuring that goods imported into Europe are subject to the carbon price charged on the European market. It seeks to avoid carbon leakage and remedy the distortion of competitiveness between European producers and those in countries implementing less ambitious climate policies.
The CBAM was adopted by the European Parliament and the EU Council in April 2023 and came into effect on the 1st of October.
The CBAM applies to imported cement, fertiliser, steel and ferrous metals, aluminium, hydrogen, and electricity. A transitional phase of only reporting starts in October 2023, before the measure is fully implemented in 2026 when importers will have to purchase emission certificates corresponding to the carbon footprint of the imported goods. The pace of CBAM implementation will correlate with the phasing out free allowances from the EU Emissions Trading Scheme (EU ETS) by 2035.
This unprecedented measure appears promising both from an environmental point of view, by contributing to climate objectives, and from an economic point of view, by mitigating the distortion of competitiveness that weighs on European producers as the price of carbon rises. The expansion of its scope is awaited, to go beyond the coverage of a limited number of emitting raw materials. Beyond these direct impacts, which are currently limited by the small number of products covered, the CBAM might pave the way for a transformation of trade and climate governance at the global level.
WITH THIS EXPERT OPINION, I CARE OFFERS AN OVERVIEW OF THE COMING CHALLENGES FOR COMPANIES UNDER THE CARBON BORDER ADJUSTMENT MECHANISM AND ITS INCREMENTAL IMPLEMENTATION SINCE OCTOBRE 2023.
This expert opinion, written in October 2023 by Eulalie Saïsset and Azilis Bas, is part of a series of publications called “Yes We Care About” that is published by I Care, and can be found in the section “Insights”
