The Carbon Border Adjustment Mechanism and Global Implications

To address concerns of carbon leakage and protect local industries, the EU introduced the Carbon Border Adjustment Mechanism (CBAM) in 2023. CBAM requires importers of goods like steel to purchase CBAM certificates based on their carbon content, ensuring that imported products are subject to similar carbon costs as those produced within the EU. While this levels the playing field and prevents outsourcing of emissions, it poses challenges for exporting countries like India, potentially affecting their market competitiveness and economic growth. Critics highlight the possible negative impact on developing nations and suggest implementing pollution taxes on historically high-emission countries to support global emission reduction efforts.