The Sound of Economics All about CBAM, the cross-border carbon levy
Jan 28, 2026
Ben McWilliams, Bruegel researcher on electricity and carbon pricing, and Ignacio García Bercero, experienced EU trade and climate negotiator, unpack the EU’s carbon border adjustment. They discuss which sectors and countries face the biggest hits. They debate how to trace emissions for electricity, the political and WTO implications, and how CBAM interacts with carbon markets and industrial policy.
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CBAM Ensures Carbon-Price Parity
- CBAM's core goal is to make imports face the same carbon price as EU producers to avoid carbon leakage.
- Importers report embedded emissions and pay charges or face default values when verification is missing.
Verification Lowers Default Penalties
- Verified declarations let importers avoid higher default carbon intensities tied to country averages of the most carbon-intensive producers.
- Small exporters, especially in developing countries, risk paying higher defaults due to weak data or verification capacity.
Deductions Prevent Double Charging
- CBAM deducts free allowances retained by EU producers and any carbon price already paid in the exporting country.
- The Commission must still define default assumptions for third-country carbon prices to calculate deductions.