Carbon Border Adjustment Mechanism

Under CBAM, importers into the EU are required to report embedded emissions associated with certain products being imported. During the transition phase, lasting until January 1, 2026, importers will only be required to report total embedded emissions. Following this phase, importers will be required to purchase and retire CBAM certificates corresponding to the embedded emissions associated with their products, making it harder for products with high embedded emissions to enter the EU. The price of certificates will be set by the weekly average auction price of EU ETS allowances, the EU’s cap and trade system.