The Carbon Border Adjustment Mechanism is a key component of the European Union’s climate strategy under the European Green Deal. It introduces a carbon pricing system on certain imported goods—such as steel, cement, aluminium, fertilisers, electricity, and hydrogen—to ensure that these products are subject to the same carbon costs as goods produced within the EU under the EU Emissions Trading System (EU ETS). The mechanism is designed to prevent carbon leakage, where businesses shift production to countries with laxer climate regulations, thereby undermining global climate efforts. By leveling the playing field for EU industries and incentivizing cleaner production practices globally, CBAM supports the EU's goal of achieving climate neutrality by 2050.
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