The EU is extending its ground-breaking carbon border adjustment mechanism (CBAM), which imposes carbon pricing on raw materials imported from outside the EU, to 180 downstream products made from those materials. The CBAM is the first attempt worldwide to tax the carbon emissions of imports. It aims to ensure that domestic manufacturers who must pay for their greenhouse gas emissions under the EU Emissions Trading Scheme (ETS) are not at a competitive disadvantage.
The CBAM comes into force on Jan. 1, 2026, and was revised and simplified in September. The sectors most affected include machinery, hardware and fabrications, vehicle components, domestic appliances, and construction equipment. Nitrogen fertilisers are also in scope.
