The encyclopedia · Strategy & Leadership · Strategic decision · 2023–2026
The EU's CBAM priced the carbon inside imported goods so leakage stopped paying
Importers pay the gap between their goods' carbon cost and the EU price, so offshoring no longer dodges the carbon price.
European Commission · EU importers · non-EU steel, cement, aluminium
the move
The EU prices carbon through its Emissions Trading System, but imported goods made in regions with no similar price were cheaper.
CBAM makes importers buy certificates whose price tracks the EU ETS allowance price, minus any carbon price already paid abroad.
The mechanism starts with reporting (2023–2025) and moves to full payment and certificate surrender from 2026.
Its aim is to stop 'carbon leakage' — relocating or importing to dodge the EU carbon cost.
why it works
- It prices the embedded emissions, not just the finished import.
- Importers deduct any carbon price already paid, so no double charge.
- It neutralises the cost advantage of unregulated foreign production.
- It lets the EU keep a strong domestic carbon price without losing industry.
what transfers
To keep an environmental price from being competed away by imports, charge the difference at the border instead of lowering the domestic price.
what came after
The transitional reporting phase ran from 1 October 2023 to 31 December 2025; the definitive regime began on 1 January 2026 with importers paying and surrendering certificates, with the payment share rising progressively in later years.
references
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