A brief explanation of the CBAM proposal

The document outlines the EU's proposed Carbon Border Adjustment Mechanism (CBAM), designed to prevent carbon leakage by requiring importers to purchase certificates for embedded emissions in specific goods. It details the sectors covered, the calculation of emissions, the phase-out of free ETS allowances, and the transitional period from 2023 to 2025. Carbon Market Watch critiques the proposal for excluding bulk chemicals and indirect emissions, the slow phase-out of free allocations, and the plan to use revenues for COVID-19 debt repayment rather than international climate finance.

• The CBAM aims to achieve climate neutrality by 2050 by addressing carbon leakage, which occurs when EU producers shift production to countries with less stringent climate policies to reduce costs.
• Importers of specific goods must purchase CBAM certificates pegged to the average weekly price of EU Emissions Trading System (ETS) auctions; these certificates are not tradeable or bankable and are valid for two years.
• The initial scope of CBAM covers direct emissions (scope 1) for the electricity, cement, aluminium, iron and steel, and fertilisers sectors, though Carbon Market Watch argues that bulk chemicals and indirect emissions (scope 2) should also be included.
• The proposal plans to phase out free ETS allowances for CBAM sectors by 2035, with a 10% annual reduction starting in 2026 and a 50% reduction by 2030.
• A transitional period from 2023 to 2025 requires importers to report embedded emissions quarterly without financial payments; payments for certificates begin in 2026.
• The European Commission intends to allocate all CBAM revenues to the EU's 'own resources' to repay COVID-19 recovery debt, a move Carbon Market Watch suggests could be viewed as protectionist and should instead fund climate action in vulnerable countries.

APA

Ruggiero, A. (2021). A brief explanation of the CBAM proposal. Carbon Market Watch. https://carbonmarketwatch.org/2021/12/16/a-brief-explanation-of-the-cbam-proposal/

Chicago

Ruggiero, Agnese. A brief explanation of the CBAM proposal. Carbon Market Watch, 2021. https://carbonmarketwatch.org/2021/12/16/a-brief-explanation-of-the-cbam-proposal/.

Wikipedia

{{cite report |last1=Ruggiero |first1=Agnese |title=A brief explanation of the CBAM proposal |publisher=Carbon Market Watch |date=16 December 2021 |url=https://carbonmarketwatch.org/2021/12/16/a-brief-explanation-of-the-cbam-proposal/ |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{ruggiero2021brief, author = {Ruggiero, Agnese}, title = {{A brief explanation of the CBAM proposal}}, institution = {Carbon Market Watch}, year = {2021}, month = dec, url = {https://carbonmarketwatch.org/2021/12/16/a-brief-explanation-of-the-cbam-proposal/}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }