The EU has presented its proposal for a Carbon Border Adjustment Mechanism (CBAM). The mechanism is closely aligned with the EU’s emissions trading scheme and the purpose of the CBAM is to be able to increase the EU’s internal carbon price without pushing production offshore. This risk of “carbon leakage” arises when energy-intensive goods can be produced outside of the EU without being subject to the EU ETS and then be put on the market alongside products produced in the EU.
For more details, see our Legal Update here.