CBAM

Carbon Border Adjustment Mechanism, or CBAM, issued by EU, is an environmental trade policy designed to tackle the issue of carbon leakage. Carbon leakage occurs when industries move their production to regions with loose environmental regulations, resulting in an increase in global emissions.

CBAM includes carbon taxes on goods imported into the markets of EU member countries. This mechanism aims to balance the carbon price between domestic and imported products, preventing the risk of EU businesses relocating carbon-intensive production to other countries to take advantage of lax standards (carbon leakage). The EU believes that applying a green mechanism to imported goods from outside the EU through a carbon pricing system will encourage cleaner industries in countries beyond the EU.