Regulation on Carbon Adjustment Published by the EU

Today, EU Regulation 2023/956 was published, establishing the Cross-Border Carbon Adjustment Mechanism (CBAM).

The Regulation was approved by the European Parliament on April 18, 2023, and subsequently endorsed by the Council of the European Union.

CBAM is a climate measure aimed at reducing global greenhouse gas emissions and preventing the risk of carbon leakage. It aims to ensure that imported products are subject to a regulatory system that applies carbon costs equivalent to those borne by the EU, resulting in an equivalent carbon price for imports and domestic products.

CBAM, along with the Emissions Trading System (ETS), is part of the European Union's "Fit for 55 in 2030" climate package, which aims to reduce greenhouse gas emissions by at least 55% by 2030 compared to 1990 levels, in accordance with the European Climate Law.

As such, gradually, tariffs will be implemented on imports to the EU of steel, cement, aluminum, fertilizers, electricity, and hydrogen. Importers of these goods will have to pay the price difference between the carbon paid in the country of production and the price of carbon allowances in the European Union.