Significance
The scheme will require non-EU producers to pay a fee on the iron and steel, cement, fertilisers, aluminium and electricity they export to the EU from 2023. This will aim to reflect the CO2 cost that EU producers pay under the EU’s Emissions Trading System (ETS).
Impacts
Carbon leakage could still occur in those industries covered by ETS but not CBAM, such as chemicals, ceramics and paper.
CBAM will bring significant administrative costs, with small and medium-sized firms set to suffer the most.
The narrow coverage of CBAM reduces its impact on least developed regions, but that could change if the scheme is extended to other areas.