Why is the EU putting in place a Carbon Border Adjustment Mechanism?
The EU is at the forefront of international efforts to fight climate change. The European Green Deal set out a clear path towards achieving the EU's ambitious target of a 55% net reduction in greenhouse gas emissions compared to 1990 levels by 2030, and to become climate-neutral by 2050. In July 2021, the Commission made its Fit for 55 policy proposals to turn this ambition into reality, further establishing the EU as a global climate leader. Since then, those policies have taken shape through negotiations with co-legislators, the European Parliament and the Council, and many have now been signed into EU law. This includes the EU’s Carbon Border Adjustment Mechanism (CBAM).
As the EU raises its climate ambition and less stringent environmental and climate policies prevail in some non-EU countries, there is a strong risk of so-called ‘carbon leakage' – i.e. companies based in the EU could move carbon-intensive production abroad to take advantage of laxer standards, or EU products could be replaced by more carbon-intensive imports. Such carbon leakage can shift emissions outside of Europe and therefore seriously undermine the EU’s as well as global climate efforts. The CBAM will support the EU’s increased climate ambition and ensure that climate action is not undermined by production relocating to countries with less ambitious policies.
Source: EC’s Questions and Answers on CBAM