Carbon Boundary Adjustment Mechanism (CBAM)

The European Union already has rules for pricing the CO2 emissions of certain goods. Some businesses sourced their materials from outside Europe because such rules either do not exist there or are less strict. As a result, producers do not have to take CO2 taxes into account when calculating their costs. The EU has called this situation undesirable because production is moving outside of Europe, which is also against the EU's environmental goals. That is why the EU is introducing a mechanism of fees for CO2 emissions from goods produced outside Europe.

How CBAM works

Companies that import goods from outside the EU will have to pay a fee for CO2 emissions arising from the production of these goods.

From 2026, companies must cover these emissions using so-called CBAM certificates. One certificate represents one ton of CO2 emissions. The ultimate goal is for manufacturers to adopt greener production methods and reduce global CO2 emissions. (More on lexology.com)