Carbon Border Adjustment Mechanism (CBAM)

The Carbon Border Adjustment Mechanism is an EU policy that places a carbon price on imports of certain goods (cement, iron, steel, aluminium, fertilisers, electricity, and hydrogen) based on the emissions generated during their production. CBAM prevents carbon leakage - where companies relocate production to countries with weaker climate policies - by ensuring imports face comparable carbon costs to goods produced within the EU ETS.