As a result of ongoing discussions, the European Parliament and the Council of the European Union announced on December 13, 2022, that a provisional agreement had been reached to implement a European Union (“EUâ€) Carbon Border Adjustment Mechanism (“CBAMâ€) beginning on October 1, 2023. The CBAM, the first of its kind, is designed to mitigate the risks of “carbon leakage†— the relocation of facilities outside of the EU to circumvent emissions limits only to then ship goods back into the original EU markets — and is essentially a carbon levy applied on imports of products in the iron and steel, cement, aluminum, fertilizer, hydrogen, and electricity sectors. The CBAM is touted as a key part of the EU’s aim to achieve climate neutrality by 2050.
