The EU is concerned about the risk of “carbon leakage” as it raises its own climate ambition while less stringent climate policies prevail in many non-EU countries. To address this, the EU has introduced the Carbon Border Adjustment Mechanism (CBAM) to put a fair price on the carbon emitted during the production of carbon-intensive goods entering the EU and encourage cleaner industrial production in non-EU countries. The CBAM will ensure that the carbon price of imports is equivalent to the carbon price of domestic production and is designed to be compatible with WTO-rules.
