Carbon Border Adjustment Mechanism (CBAM)

The Carbon Border Adjustment Mechanism (CBAM) is a policy tool implemented by the European Union to address carbon leakage, where domestic industries may be disadvantaged by more stringent environmental regulations compared to foreign competitors.

CBAM seeks to level the playing field by imposing a carbon price on imported goods based on their carbon footprint, ensuring that foreign products are subject to similar environmental standards as domestically produced ones. This mechanism aims to incentivize emissions reduction globally and protect the competitiveness of domestic industries committed to reducing their carbon emissions.