Navigation on the green trade border of the European Union

According to the EU, carbon leakage occurs when businesses move industries to or import products from countries with less stringent environmental policies, apparently circumventing the European Union's costly climate policies.

Before getting to the basics of CBAM, it is essential to clarify the EU climate policies that have contributed to carbon leakage in the first place.

The genesis of CBAM

The EU is constantly striving to be at the forefront of reducing greenhouse gas emissions. This ambitious goal has become a fundamental aspect not only of CBAM, but also of the European Union Emissions Trading System (hereinafter referred to as " EU ETS ”), leading to the creation of one of the world's first major carbon trading markets. The EU ETS is a system within the European Union that penalizes carbon-intensive production of products and stimulates low-carbon emissions. (Aayush Rastogi, more at lexology.com)