The Carbon Border Adjustment Mechanism (CBAM) is not an import tariff or tax, but requires non-EU companies to pay for their own CO2 emissions, just as European companies already must. This 'environmental adjustment' at the border ensures that imports are not cheaper than environmentally friendly European products.
“Do foreign companies want to bring their products into our market? Then they must comply with our climate rules as well,” says Dutch MEP Mohammed Chahim (PvdA), who led the negotiations on behalf of the European Parliament.
The CO2 levy at the European border is, according to his fellow negotiator Pascal Canfin (France), a global first. “With this directive, the polluter truly pays, and we encourage the rest of the world to also become more climate-friendly.”
During the first three years, the new system will primarily focus on a few large industries, such as steel, aluminum, and fertilizers. But around 2026, the ‘environmental adjustment’ is expected to also apply to derivative products, such as the import of cars or grains grown with fertilizers.
The new directive is intended not only to ensure a level playing field for businesses but also to prevent EU companies from relocating to countries without penalties for environmental violations. EU countries have been working for some time on establishing a ‘mirror clause’ in trade agreements: the environmental standards that the EU imposes on its own companies must also apply to non-EU companies.