- The EU has the world’s largest carbon-pricing system, the emissions trading system (ETS), which can encourage industrial decarbonisation but risks carbon leakage.
- To address this, the EU is phasing out free allocations and introducing a new carbon border adjustment mechanism (CBAM) requiring importers to purchase certificates equivalent to the weekly EU carbon price.
- The CBAM initially applies to five emissions-intensive sectors and aims to contribute to the EU’s climate neutrality objectives while encouraging third-country producers to decarbonise.
- The legislation was adopted by the Council and Parliament, with a provisional agreement reached in December 2022 and fully coming into effect in January 2026.
Source europarl.europa.eu
