The European Union has brought into force its new carbon border adjustment mechanism (CBAM), marking a major shift in global trade rules for high-emission goods such as steel, cement, aluminium and fertilisers. Under the system, companies exporting these products to the EU must now account for the carbon emissions generated during production or face financial penalties.
The CBAM is designed to prevent unfair competition by ensuring that foreign producers meet carbon costs similar to those faced by EU manufacturers. By doing so, the EU aims to discourage companies from shifting production to countries with weaker environmental rules and to support its broader decarbonisation goals.
Exporters will be required to purchase certificates reflecting the carbon footprint of their goods. Initially, the mechanism applies to iron and steel, aluminium, cement, hydrogen, electricity and fertilisers, with plans to expand coverage to manufactured products such as machinery and electrical equipment from 2028.
While EU industries broadly support the move, some concerns remain over possible price increases and trade disruptions. There are also fears that surplus high-carbon products could be redirected to other markets, including the UK, which plans to introduce its own carbon border system next year.
Despite uncertainties in early implementation, the EU maintains that the CBAM will strengthen industrial competitiveness while accelerating the transition to cleaner production across global supply chains.