The Carbon Border Adjustment Mechanism (CBAM) is a regulation from the European Union that puts a carbon price on certain imported goods. The goal is to make sure that products coming from outside the EU follow the same climate rules as products made inside the EU. 

By doing this, the EU wants to reduce global emissions, support fair competition, and protect its climate goals. 

Why CBAM Matters 

CBAM is important because it: 

• Prevents carbon leakage: This means stopping companies from moving production to countries with weaker climate laws. 
• Levels the playing field: EU and non-EU producers face similar costs for carbon emissions. 
• Encourages cleaner production worldwide: Exporters to the EU have a reason to reduce emissions. 
• Supports EU climate goals: It’s part of the EU’s larger climate plan, including the European Green Deal and the Fit for 55 package. 

CBAM works in connection with the EU’s Emissions Trading System (ETS) and alongside other regulations like the CSRD and the EU Taxonomy. 

Who Has to Follow CBAM Rules? 

CBAM applies to: 

• EU companies importing specific goods that cause a lot of emissions, like steel, cement, fertilizer, aluminum, hydrogen, and electricity. 
• Non-EU producers of these goods, who must provide data about emissions when asked. 
• All importers of these products, no matter their size, must follow the reporting and compliance rules. 

How CBAM Works in Practice 

If you import CBAM-regulated goods into the EU, you must: 

• Report the carbon emissions linked to each imported product. You can use verified data from the producer or EU-provided default values. 
• Buy and submit CBAM certificates, which represent the carbon cost of your goods. 
• The price per certificate is based on what EU companies would pay under the EU Emissions Trading System (ETS). 
• Avoid double payment: If the product’s country of origin already charged a carbon price, that cost can be deducted from what you owe in the EU.