Fact Sheet on the Carbon Border Adjustment Mechanism (CBAM) in the European Union.

This fact sheet shows how the EU aims to combat carbon leakage and ensure a fair and consistent approach to carbon pricing for imported goods while promoting cleaner industry practices globally.

  • 1The European Union (EU) is committed to addressing climate change but is concerned about “carbon leakage” if other countries maintain less rigorous climate policies.
  • 2Carbon leakage refers to EU companies relocating carbon-intensive production to countries with less stringent climate regulations or carbon-intensive imports replacing EU-made products.
  • 3The EU has introduced the Carbon Border Adjustment Mechanism (CBAM) to tackle this challenge.
  • 4The CBAM establishes a fair price for carbon emissions associated with producing carbon-intensive goods entering the EU.
  • 5CBAM aims to incentivize cleaner industrial practices in non-EU countries.
  • 6The primary objective of the CBAM is to ensure that imported goods pay a price for embedded carbon emissions that matches the carbon price of domestically produced goods.
  • 7The CBAM complies with the rules set by the World Trade Organization (WTO).
  • 8In May 10, 2023, the CBAM Regulation was signed and officially enacted on May 16, 2023.
  • 9The CBAM aligns with gradually phasing out free allowances granted under the EU Emissions Trading System (ETS).
  • 10The CBAM enters into force during its transitional phase starting from October 1, 2023, with no financial payments or adjustments required.
  • 11The CBAM will be implemented in stages, with a transitional phase starting on October 1, 2023.
  • 12During the transitional phase, importers must adhere to reporting requirements for their emissions.
  • 13The first reporting period ends on January 31, 2024.
  • 14Specific guidelines and obligations for reporting emissions under CBAM will be outlined in an implementing act developed by the Commission in consultation with the CBAM Committee.
  • 15The CBAM initially targets imports of goods associated with high carbon emissions and at risk of carbon leakage, including electricity, hydrogen, iron and steel, fertilizers, aluminium, and cement.
  • 16As the CBAM is phased in, it will eventually cover over 50% of emissions in sectors already covered by the EU ETS.
  • 17Indirect emissions will be included in the CBAM scope for specific sectors, such as cement and fertilizers, after the transitional period, with the methodology for measuring these emissions to be developed.
  • 18The transitional period serves as a pilot phase to gather information and refine the methodology for the final period.
  • 19Importers must declare the number of goods imported into the EU annually and associated embedded GHG emissions.
  • 20All importers require a surrender of CBAM certificates based on the emissions declared.
  • 21Based on the weekly average of EUA auctioned price, the price of CBAM certificates will be determined.
  • 22The permanent CBAM system comes into effect on January 1, 2026.
  • 23The phasing-out of free allocation under the EU ETS will occur alongside the phased introduction of the CBAM between 2026 and 2034.