Carbon Border Adjustment Mechanisms Worldwide

Carbon Border Adjustment Mechanisms (CBAMs) are policy tools designed to level the playing field between domestic industries subject to carbon pricing and foreign producers from countries with less stringent climate regulations. By imposing a carbon cost on imported goods equivalent to that paid by local manufacturers, CBAMs aim to prevent carbon leakage—where companies relocate production to avoid emissions costs—and encourage global emissions reductions. Several regions and countries are developing or implementing CBAMs. The European Union leads with its proposed CBAM targeting imports of carbon-intensive products like steel, cement, and aluminum, aligning with its Green Deal goals. Other economies, including Canada, the United States, and the United Kingdom, are studying or piloting similar mechanisms to protect their industries and meet climate commitments. CBAMs raise complex legal and diplomatic issues, especially concerning World Trade Organization (WTO) rules and international cooperation. Critics argue they could spark trade disputes or disproportionately impact developing countries. Nonetheless, CBAMs are increasingly viewed as critical tools for integrating climate objectives into international trade, incentivizing cleaner production worldwide, and advancing the global transition to net-zero emissions.