The EU has proposed the adoption of a Carbon Border Adjustment Mechanism (CBAM) as part of its “Fit for 55” package of climate measures. CBAM is a carbon pricing framework that aims to reduce CO2 emissions and achieve carbon neutrality by 2055. It targets the import of products in carbon-intensive industries and puts a fair price on carbon emitted during their manufacturing. CBAM will apply to “covered products” imported into the EU from countries outside the EU, unless the non-EU country already participates in the EU Emission Trading System or if the country links its emission trading system to the ETS and adopts the same carbon price. Charges will be levied based on the amount of embedded GHG in an imported product, and a certificate system will be used to cover the embedded emissions. CBAM will be phased in gradually over a three-year period, with transitional reporting requirements initially applying to imports of certain carbon-intensive products from 1 October 2023, followed by operation of the full measures from 1 January 2026.
Source BDO
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