EU Carbon Border Adjustment Mechanism — CBAM

Category: Economy / Environment / International Trade / Climate Policy

What is CBAM?

Carbon Border Adjustment Mechanism (CBAM) is an EU mechanism designed to place a carbon cost on certain imported carbon-intensive goods.

Objective

  • Prevent carbon leakage.

  • Encourage cleaner production.

  • Ensure imported goods face a carbon-related cost comparable to EU production.

Definitive Regime

  • EU's CBAM definitive regime began on 1 January 2026.

Covered Sectors

Initially includes:

  • Cement

  • Iron and steel

  • Aluminium

  • Fertilisers

  • Electricity

  • Hydrogen.

Significance for India

Potentially affects India's:

  • Steel exports

  • Aluminium exports

  • Other carbon-intensive exports.

Indian Concerns

  • Higher compliance costs

  • Export competitiveness

  • Measurement of embedded emissions

  • Climate equity

  • Possible trade-policy implications.

Prelims

CBAM = EU climate/trade instrument, not a conventional customs tariff.