The European Union has reached a provisional agreement on the Carbon Border Adjustment Mechanism (CBAM) to impose a carbon dioxide emissions tariff on imports of polluting goods such as steel and cement, a world-first scheme to assist European industries in decarbonising.
The agreement needs to be confirmed by ambassadors of the EU member states and by the European Parliament and adopted by both institutions before it is final.
Regarding the goods and industries covered by the new regulations, CBAM will initially apply to a select group of particular goods in some of the industries with the highest carbon footprints: iron and steel, cement, fertilisers, aluminium, electricity, and hydrogen, as well as a few precursors and a small number of downstream goods. Indirect emissions would also be included in the regulation in a well-circumscribed manner.
The provisional agreement states that CBAM will start operating in October 2023. A streamlined CBAM would initially be in place, with reporting requirements only. The goal is to gather data. After that, the full CBAM will start operating. Once it begins under the revised EU emissions trading system (ETS) for the affected sectors, it would be phased in gradually, parallel to a phase-out of the free allowances. This will guarantee that CBAM complies with global trade regulations. Further, some details on the law will be determined later this week in related negotiations on a reform of the EU carbon market.