Europe| CBAM: Driving the Green Transition Within and Beyond the EU

Summary

CBAM should strengthen the EU’s green transition while also promoting fair competition and global decarbonization. It will impact key trade partners, particularly those exporting high-carbon products, pushing them to adopt more sustainable practices.

Key points

• Key points:
• The EU’s Carbon Border Adjustment Mechanism (CBAM) aims to reduce carbon leakage and promote global decarbonization by assigning a carbon cost to imported high-emission goods. It levels the playing field for EU industries facing stricter climate regulations and incentivizes non-EU producers to adopt sustainable practices.
• CBAM will significantly affect countries exporting carbon-intensive goods in sectors like steel, aluminum, cement, fertilizers, and electricity. Companies must adapt to new reporting requirements, potential cost increases, and sourcing constraints.
• The European Commission plans to review and potentially expand CBAM’s scope to include more downstream products and additional sectors by 2030. This move aims to enhance the mechanism’s effectiveness, further prevent carbon leakage, and promote global carbon pricing​.

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