Why the CBAM
Within the European Union, rules are already in place for pricing the carbon emissions of certain goods. This is the reason for some entrepreneurs to source their materials from outside Europe because those rules have not yet or to a lesser extent been implemented there. As a result, manufacturers do not have to consider carbon levies when determining the cost price of their products. The European Union mentioned that this is an undesirable situation because production moves outside Europe. Moreover, this goes against European environmental targets originating from the European Green Deal. Therefore, the European Union is introducing a charging mechanism for carbon emissions from goods produced outside Europe.
The Carbon Border Adjustment Mechanism (CBAM) is part of the EU's overarching climate strategy: Fit for 55 by 2030. This plan aims for CO₂ emissions in 2030 to be reduced by 55% compared to 1990. The CBAM scheme became in force as of 1 October 2023 and may be extended in phases.
The CBAM:
- Counteracts unwanted relocation of production to countries outside of Europe
- Encourages producers to produce in a more environmentally friendly way
- Contributes to achieving European environmental targets
- Phased in from October 2023
The goods subjected to this levy
The CBAM applies to goods from outside Europe known to have high carbon emissions. These include cement, iron and steel, aluminium, fertilisers, hydrogen and electricity and certain products made from them. In 2026, this group of products may be expanded to include polymers (plastics) and chemicals. The relevant product groups are denoted by their product codes which are indicated on entry.
