The EU Carbon Border Adjustment Mechanism (CBAM) and EU Emissions Trading System (ETS) are both aimed at reducing carbon emissions by placing a price on carbon.
They are intended to be complementary, with the revised ETS applying to intra-EU goods and the CBAM applying to goods imported into the EU.
The CBAM - which is ground-breaking legislation - will apply a cost of carbon to imports of certain goods based on the carbon emissions associated with their manufacture. It is intended to prevent so-called “carbon-leakage”, i.e. the relocation of energy intensive production from the EU to countries with lower levels of regulation of greenhouse gas emissions.
For more information, see our client briefing: EU Carbon Border Adjustment Mechanism (CBAM): What you need to know.